Hong Kong Housing Prices Still Overvalued

According to UBS Global Real Estate Bubble Index 2023 report, global inflation and soaring interest rates over the past 2 years have led to a sharp decline in real estate market imbalances of global financial centers on average, with only Zurich and Tokyo remaining in the housing bubble risk category, a significant reduction from 9 cities a year ago.

The report mentioned that Toronto, Frankfurt, Munich, Hong Kong, Vancouver, Amsterdam and Tel Aviv, which were previously in bubble risk zone, are now in the overvalued territory.

The housing markets in Miami, Geneva, Los Angeles, London, Stockholm, Paris and Sydney also continue to be overvalued compared to 2022.

Zurich leads the real estate bubble index of 1.71, followed by Tokyo at 1.65. Miami, Munich and Frankfurt are in the third to fifth places.

Hong Kong's real estate bubble index reached 1.24 and dropped to the sixth position. The report pointed out that Hong Kong had been at the bubble risk level since the commencement of the study.

However, after declining 7% between mid-2022 and mid-2023, inflation-adjusted house prices in Hong Kong are back to the 2017 levels. Household leverage stabilized and rents have been virtually unchanged in the last 4 quarters as population inflow increased.

However, high mortgage rates and a slow economic recovery in China put pressure on house demand. Overall, UBS considered Hong Kong have been overvalued. Rising inventories are a sign that weakness on the housing market is going to continue in the near future.