Hong Kong and New York to see a drop in high-end housing prices

Hong Kong’s political and interest rate uncertainty is deterring buyers and stoking demand. The combination of these factors will cause the prime residential market to decline by over 10% this year.

Hong Kong and New York are just three of the major cities where residential property values will be declining this year.

Bloomberg reported that Savills expects more than half the 30 global cities it monitors to see slower growth of residential capital values by 2024. Savills expects the annual growth rate of residential capital values to be 0.6 percent this year, down from 2.2 percent in 2023. It is also the lowest since 2019.

Although prime residential properties are less resistant to mortgages than other residential properties, the weaker macroeconomic environment will affect sentiment. Many potential buyers will wait and see.

Global markets are unable to cope with the sharply rising borrowing costs that will remain for some time, as well as a scarcity of homes which is driving up prices.

New York, San Francisco and Hong Kong are the two other cities that have shown weakness, the former with a muted office return and the latter with tech turmoil.

Chinese cities like Shenzhen Guangzhou and Hangzhou will also see a decline as the government struggles with stabilising the country’s volatile real estate market.

Savills reported that the global prime rental value grew by 5.1% in 2023. This outpaced capital values in nearly every city they monitor, partly because of increased demand by prospective buyers who are delaying their purchases until rates have stabilized.

Following a post pandemic surge of demand, prime residential markets in the world’s most wealthy cities saw muted growth by 2023.

After the introduction of rent-controls, demand exceeded supply in Lisbon, resulting in an average 22 per cent increase between July and last December.

Sydney and Dubai will both see price increases of up to 9.9% and 5.9%, respectively. Amsterdam and Tokyo both predicted growth which, along with the average capital value forecast for the 30 cities, helped to maintain a positive outlook.

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Savills reports that, even so, the wave of elections scheduled to take place in 70 countries in 2024, could limit values in many more major cities.

Elections in 2019 will bring additional uncertainty to the future. In 2024, we expect lower but still positive levels of capital values growth.

The prospects of homebuyers are still boosted by the ease in inflationary pressures. Savills stated that central banks’ potential to reduce interest rates this year may surprise buyers in the later part of the calendar year.

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