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Hong Kong’s Housing Problem

Hong Kong is ranked as the fourth most densely populated region. Its geographical constraints and limited land supply have created a scarcity of developable land, causing high demand for available properties, and pushing prices upward. Economic prosperity during the early 2000s translated into higher income for consumers and an outward shift in demand for property, further inflating prices. Between 2004 and 2021, the real price index of residential homes in Hong Kong rose by 239 per cent, despite the fact that the real wage index grew by only 7.1%.


The Availability of Public Housing


The supply of new public housing slowed from an average of approximately 44,000 between 1997 and 2003 to an average of around 15,000 between 2004 and 2017. Wait times began to rise again after 2011, as private-sector rents increased relative to public-sector rents, from around two years to over six years by 2022. 



The rise of new construction of smaller units (Class A flats) was the property market's response to increased demand for cheap private-sector units. Prices of low-value private homes still soared, indicating still, a lack of supply


Unresponsive public sector rents meant low-end housing prices were sensitive to inadequate supply because public-sector rent adjustment lagged behind rising market rents from 2005 to 2020. Public renters became unwilling to move out to the private sector due to low prices, directly causing public housing wait times to soar, and a large segment of low-income households must compete for a small pool of affordable private-sector housing. This further increases the demand and therefore prices for low-end housing at a much greater rate than higher-end housing.


  • Consumers are stuck with the predicament of being too ‘rich’ to qualify for public housing yet cannot fully afford the rising prices of private housing 

  • The number of individuals in this predicament is increasing, which shifts demand outward for low-income private housing

  • As demand rises, the prices for low-income private housing are driven to soar, exacerbating the affordability crisis


Drop in price from 2020 onwards


  1. Migration outflow + Political instability



  • A substantial number of residents left due to the wake of political unrest and subsequently sold property

  • Increasing the supply of available housing and leading to downward pressure on prices 

  • The economic contraction during 2020 was exacerbated by the pandemic, with Hong Kong's GDP shrinking by 3.5% in 2022 

  • Ongoing geopolitical tensions have also deterred foreign investments

  • The number of transactions in the housing market fell sharply, with a reported 30% decline in transactions in 2022 compared to previous years 


  1. Covid recovery weaker than expected


  • The government projected a GDP growth of 3.2% for 2023, a downward revision from earlier estimates of 5% 

  • Sluggish recovery has limited the rebound in housing demand, as many consumers remain cautious amid economic uncertainties


  1. Interest rates increase


  • In late 2023, Hong Kong's benchmark interest rate reached 4.28%, the highest level since March 2008

  • Rise in borrowing costs → Mortgages less affordable → Disposable income drops → Decrease in consumer demand

  • Due to these rising costs, Goldman Sachs has projected that residential property prices could fall by as much as 20% by the end of 2025.


Reference List


‌GOVERNMENT ECONOMIST FINANCIAL SECRETARY’S OFFICE . 2021 Economic Background and 2022 Prospects. Hkeconomy, Feb. 2022, www.hkeconomy.gov.hk/en/pdf/er_21q4.pdf.


Guide, G.P. (2024). Hong Kong’s housing market conditions continue to deteriorate. Global Property Guide. [online] doi:https://www.globalpropertyguide.com/asia/hong-kong/price-history.


South China Morning Post. (2018). SCMP. [online] Available at: https://www.scmp.com/news/hong-kong/society/article/2164767/about-300-hectares-hong-kong-government-land-underutilised-or [Accessed 1 Dec. 2024].

Wu, T., Cheng, M. and Wong, K. (2017). Bayesian analysis of Hong Kong’s housing price dynamics. Pacific Economic Review, 22(3), pp.312–331. doi:https://doi.org/10.1111/1468-0106.12232.

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