Hong Kong

Hong Kong’s housing market conditions continue to deteriorate

Lalaine C. Delmendo

Hong Kong’s housing market condition is worsening, amidst a chronic supply shortage and falling property demand caused by the continuing affordability crisis and surging interest rates in the city.

Hong Kong’s residential property price index fell sharply by 13.2% in Q1 2024 from the same period last year, its ninth consecutive quarter of year-on-year decline, according to data released by the Ratings and Valuation Department (RVD). It was its third biggest year-on-year fall in the past two decades. When adjusted for inflation, residential property prices were down by 14.9% over the same period.

Variations in price movements per property size and region:

  • Apartments smaller than 40 sq. m: prices fell by 16.2% y-o-y in Q1 2024, to an average of HK$134,020 (US$17,154) per sq. m.
  • 40-69.9 sq. m. apartments: prices were down by 16% y-o-y to HK$141,129 (US$18,064) per sq. m.
  • 70-99.9 sq. m. apartments: prices dropped 16.6% y-o-y to HK$169,177 (US$21,654) per sq. m.
  • 100-159.9 sq. m. apartments: prices fell by 6.5% y-o-y to HK$209,668 (US$26,837) per sq. m.
  • Apartments with sizes bigger than 160 sq. m: prices fell by 4.8% y-o-y to HK$219,438 (US$28,088) per sq. m. in Q1 2024.

Hong Kong’s house price annual change

Demand continues to fall. During 2023, the number of property transactions in Hong Kong dropped 4.5% y-o-y to 43,002 units, following a huge 39.4% fall in 2022, according to the RVD. Likewise, sales volume declined by 4.5% y-o-y to HK389.25 billion (US$49.82 billion) over the same period, following a 44.4% drop in 2022. Then in the first two months of 2024, the number of property transactions plunged further by 20.2% y-o-y to 5,852 units while transactions value dropped 24.5% to HK$46.89 billion (US$6 billion).

“Over the past year, interest rates have risen significantly, various economies have shown moderated growth, and transactions of the local residential property market have declined alongside a downward adjustment of property prices,” said Hong Kong Chief Executive John Lee.

Completions plummeted by 34.6% y-o-y to 13,852 in 2023, following strong growth of 47.1% in 2022, according to figures released by RVD. However, residential construction activity seems to be improving this year. In the first two months of 2024, there were already 3,594 dwellings completed in Hong Kong – on track to surpass the completions recorded in the full year of 2022.

Hong Kong continues to suffer a chronic housing shortage – a problem that has dragged on for over two decades.

AVERAGE HOUSE PRICES, Q1 2024
Property size Average prices (per sqm) Year-on-year change
Hong Kong Kowloon New Territories Hong Kong Kowloon New Territories
HKD USD HKD USD HKD USD % % %
Less than 40 sqm 134,020 17,154 118,492 15,167 115,182 14,743 -16.2 -15.0 -15.4
40-69.9 sqm 141,129 18,064 126,995 16,255 108,951 13,946 -16.0 -13.7 -12.5
70-99.9 sqm 169,177 21,654 159,706 20,442 119,992 15,359 -16.6 -3.5 -10.2
100-159.9 sqm 209,668 26,837 182,239 23,326 109,362 13,998 -6.5 12.5 -17.4
Greater than 160 sqm 219,438 28,088 209,047 26,758 83,681 10,711 -4.8 -1.8 -34.6
Sources: Ratings and Valuation Department (RVD), Global Property Guide

From 2008 to 2013, Hong Kong’s dwelling prices skyrocketed by 134% (95.7% inflation-adjusted), driven by a flood of money in the wake of the global financial crisis.

The market slowed in the first half of 2014, but bounced back in the second half, with prices rising by 13.6% in Q4 2014, 19.6% in Q1 2015, 20.4% in Q2 2015, and 15% in Q3 2015.

After a brief housing market slowdown, house prices surged again by 41.5% (35.5% inflation-adjusted) from H2 2016 to H1 2018.

The housing market slowed from the end of 2018 until the first half of 2019 due to macro uncertainties and social unrest. After a short-lived recovery in the second half of 2019, the housing market struggled again in 2020 due to pandemic-related travel restrictions and lockdown measures imposed worldwide. Then in 2022, things got worse, with house prices plunging by 15% (-16.7 inflation-adjusted), following a modest increase of 3.7% in 2021 and a meager growth of 0.2% in 2020. In 2023, the market remained depressed, with house prices falling further by 7% (-9.2% inflation-adjusted).

HK’s housing market woes will continue in the medium term, with house prices expected to fall further by double-digit figures this year. Citigroup and UBS project HK house prices to fall by another 10% this year.

Yet the overall economic situation is improving. Hong Kong’s service-oriented economy grew by 3.2% in 2023 from a year earlier, in stark contrast to the contraction of 3.5% recorded in the prior year, according to government figures. To boost economic activity, the HK government unveiled several measures last year, including offering cash handouts to residents, cutting salaries tax, and attracting more workers and foreign investments.

In the first quarter of 2024, the HK economy recorded a moderate growth of 2.7% over a year earlier, its fifth consecutive quarter of year-on-year growth. On a seasonally adjusted quarter-on-quarter basis, real GDP grew by 2.3% in Q1 2024.

The government forecasts the HK economy to grow further by 2.5% to 3.5% this year.

Hong Kong property market remains the world’s most unaffordable

Hong Kong’s housing boom in the past decades has been propelled by a combination of stringent government regulations on development, low interest rates, and currency stability; while the supply of land, which the government controls, continues to diminish.

Hong Kong’s currency peg to the dollar kept borrowing costs near record lows, fuelling continued property demand.

HOUSE PRICE INDEX, Y-O-Y CHANGE (%)
Year Nominal Inflation-adjusted
2009 28.5 26.5
2010 21.0 17.7
2011 11.1 5.1
2012 25.7 21.2
2013 7.7 3.3
2014 13.6 8.2
2015 2.4 0.1
2016 7.9 6.6
2017 14.7 12.8
2018 1.9 -0.6
2019 5.5 2.6
2020 0.2 1.1
2021 3.7 1.3
2022 -15.0 -16.7
2023 -7.0 -9.2
Sources: Ratings and Valuation Department, Global Property Guide

Despite improved affordability because of the recent decline in house prices, Hong Kong’s property market remains the world’s most unaffordable for the twelfth year in a row, according to the Demographia International Housing Affordability Survey 2023. Average home prices were 18.8 times the gross annual median household income in 2022, down from 20.7 times in the prior year and the lowest level since 2016.

Despite the substantial improvement, “Hong Kong’s current housing affordability remains more severe than that of any other market over its period of coverage by Demographia (12 years),” said the report. “Hong Kong has been given a clear responsibility by the central government to improve housing affordability, and increase house sizes.”

Similarly, in Mercer’s 2023 Cost of Living Survey, Hong Kong was ranked as the world’s most expensive city for expatriates to live in, followed by Singapore and Zurich.

Hong Kong, along with Zurich, Tokyo, Miami, Munich, and Frankfurt, also tops the 2023 UBS Global Real Estate Bubble Index.

“Between 2003 and 2018, real house prices in Hong Kong nearly quadrupled while incomes stagnated and rents increased by just 50% in inflation-adjusted terms. Housing is barely affordable: A skilled service worker requires more than 20 times the average annual income to buy a 60 sqm flat. The city has constantly been at bubble risk levels since the first edition of this study in 2015,” said the UBS report.

“After declining 7% between mid-2022 and mid-2023, inflation-adjusted house prices in Hong Kong are back to levels last seen in 2017. Household leverage stabilized and rents have been virtually unchanged in the last four quarters as population inflow increased. However, high mortgage rates and a slow economic recovery in mainland China put pressure on house demand. Overall, we now see the city in overvalued territory,” the UBS report added.

Hong Kong Property Price Indices graph

Property sales continue to fall

During 2023, the number of property transactions in Hong Kong dropped 4.5% y-o-y to 43,002 units, following a huge 39.4% fall in 2022, according to the RVD. Likewise, sales volume declined by 4.5% y-o-y to HK389.25 billion (US$49.82 billion) over the same period, following a 44.4% drop in 2022.

Though there were wide variations in sales movements in the primary and secondary markets during 2023:

  • Primary market property sales were up by 4.2% y-o-y to 10,752 units, after plummeting by 41.6% in 2022, based on data from RVD. Likewise, total transaction values increased by 16.3% to HK$127.63 billion (US$16.34 billion), following a huge fall of 52.5% in the prior year.
  • Secondary market property sales fell by 7.2% to 32,250 units last year, after plunging by 38.7% y-o-y in 2022. Also, transaction values were down by 12.2% y-o-y to HK$ 261.62 billion (US$33.49 billion), after a huge fall of 40.8% in the prior year.

This is in line with the recent figures released by the Land Registry, which showed that a total of 58,035 properties changed hands in 2023, down by 2.7% from a year earlier and the lowest level seen since 1991. Similarly, the total value of property transactions dropped 13.8% to a 10-year low of HK$477.9 billion (US$61.2 billion).

“The figures reflect a sluggish market for the year 2023 as interest rates soared and the local economy slowed down,” said Yeung Ming-yee, senior associate director at Centaline Property Research.

Demand remains weak in early 2024. In the first two months of 2024, the number of property transactions plunged further by 20.2% y-o-y to 5,852 units while transactions value dropped 24.5% to HK$46.89 billion (US$6 billion).

Hong Kong Property Sales graph

Property curbs relaxed

To revive the struggling housing market, Hong Kong removed all extra stamp duties in February 2024, following pressure to lift long-standing housing market cooling measures, according to finance chief Paul Chan.

“After prudent consideration of the overall current situation, we decide to cancel all demand side management measures for residential properties with immediate effect, that is, no Special Stamp Duty, Buyer’s Stamp Duty, or New Residential Stamp Duty needs to be paid for any residential property transactions starting from today,” said Chan. “We consider that the relevant measures are no longer necessary amidst the current economic and market conditions.”

In October 2023, Chief Executive John Lee announced a partial easing of extra stamp duties – the first time that the property cooling measures were relaxed in over a decade. Among the property market curbs relaxed:

  • The Buyer’s Stamp Duty (BSD) and the New Residential Stamp Duty (NRSD) were halved from 15% to 7.5%.
  • The Special Stamp Duty (SSD) – equivalent to 10% of the property price – that was previously imposed on transactions involving property held for less than three years will now only apply to transactions for property held for less than two years.
  • All stamp duties on property purchases by newly-arrived foreign talents in Hong Kong are suspended, but it is subject to the new residents obtaining permanent residency.
  • Stamp duties paid by second-home buyers and non-locals were also halved from a maximum of 30% to 15%.

Earlier in September 2022, the Hong Kong Monetary Authority (HKMA) relaxed its stress-test requirements for new mortgage borrowers by 100 basis points, effectively making the test easier to pass. The recent move came amidst falling property demand, after homebuyers saw their purchasing power fall by HK$1 million (US$128,000) since January 2022, following increases in both HIBOR and banks’ prime rates.

Several rounds of market-cooling measures

Before the recent relaxation of property curbs, the HK government implemented several rounds of housing market-cooling measures in the past years to reduce speculative buying and regulate house price growth.

To discourage developers from hoarding, in June 2018 Carrie Lam introduced a vacancy tax on unsold homes that are not leased or have remained unoccupied six months after receiving an occupation permit. The tax rate is two times the rental income or 5% of the home’s value.

Aside from the tax, the government also allocated nine plots of land, including three in the prime Kai Tak district, for public housing.

In addition, the Hong Kong Monetary Authority (HKMA) imposed new restrictions on bank lending to property developers in May 2017, restricting loans to property developers to a maximum of 40% of a site’s value, replacing the earlier limit of 50%. Also, the number of loans allowed for residential property with a value less than HK$10 million (US$1.28 million) was reduced from 60% to 50% and those with a value exceeding HK$10 million (US$1.28 million) were also cut from 50% to 40%.

In addition, a 30-person Land Supply Task Force was set up to consider long-term solutions to Hong Kong’s housing crisis, given the outcry about ‘coffin homes’.

In recent years, Hong Kong’s government has leaned against property price rises:

  • In November 2010, the government imposed a ‘flip tax’ of 15% on properties resold within six months (though in May 2014 the rule was somewhat relaxed), and doubled stamp duties to 8.5% on properties worth HK$20 million (US$2.6 million) or more.
  • On October 26, 2012, the government imposed a 15% extra tax on property purchases made by foreigners.
  • In February 2013, the government doubled the stamp duty on all property transactions worth more than HK$2 million (US$254,790), though again, this measure ended in May 2014.
  • In April 2013, the Residential Properties (First-hand Sales) Ordinance to shield buyers from dishonest sales practices came into full effect.
  • In February 2015, the government required buyers of self-used residential properties valued under HK$7 million (US$900,000) to make larger down payments.
  • In November 2016, the government raised stamp duties for all property transactions to 15%, except for first-time homebuyers who are charged just 4.25%. However, house price rises continued to accelerate, amidst a surge in the number of multiple home purchases on one single transaction as investors take advantage of lower tax rates.
  • To close the loophole, the government also announced that first-time homebuyers acquiring more than one property in a single contract will be charged the same 15% stamp duty that applies to purchases of a second property starting April 2017.

Interest rates remain high

The HKMA kept its base rate unchanged at 5.75% in May 2024 – unchanged since July 2023, after raising it eleven consecutive times since March 2022, in an effort to rein in inflationary pressures. The HKMA moves in lockstep with the Fed, giving the local currency’s peg to the US dollar.

“The Fed’s future interest rate decisions will be dependent on incoming data, the evolving outlook, and the balance of risks.  It has not yet gained enough confidence about the US inflation trajectory to start cutting interest rates.  The high-interest rate environment may last for some time, the HKMA said.

“The public should carefully assess and manage the relevant risks when making a property purchase, mortgage or other borrowing decisions.  The HKMA will continue to monitor market developments and maintain monetary and financial stability closely,” the HKMA added.

Hong Kong’s currency has been pegged at around HK$7.8 per U.S. dollar since October 1983, so when the US Federal Reserve interest rates move, so do Hong Kong’s interest rates.

As such, major banks’ best lending rates remain high in Hong Kong. The best lending rate of HSBC Holdings PLC, Hang Seng Bank, and Bank of China (Hong Kong) stands at 5.875%. For other banks such as China Citic Bank International, Standard Chartered Bank, and Bank of East Asia, the best lending rate is currently at 6.125%.

Hong Kong Interest Rates graph

Fixed-rate mortgage scheme converted from pilot to permanent program

At the height of the Covid-19 pandemic, the Hong Kong Mortgage Corporation Limited (HKMC) introduced a pilot scheme for fixed-rate mortgages for 10, 15, and 20 years, to reduce homebuyers’ risks from interest rate volatility, thereby improving the banking sector’s long-run stability. The maximum loan amount for residential mortgages under the scheme is HK$ 10 million (US$1.28 million). At the end of the fixed-rate period, the borrower has the option to re-fix the mortgage rate or convert it to a floating-rate loan.

In October 2021, HKMC announced that the scheme would be converted from a pilot program into a permanent offering starting from November 1, 2021.

“Proposed in the 2020-21 Budget, the Fixed-rate Mortgage Scheme has approved loans totaling around HK$400 million in the past year and a half. This reflects a certain market demand for fixed-rate mortgage products,” said Financial Secretary Paul Chan. “The scheme has filled a market gap, and its permanent offer will continue to provide an alternative financing option to homebuyers for mitigating their risks arising from interest rate volatility, thereby enhancing banking stability in the long run.”

The fixed interest rates per annum under the scheme, which was maintained until end-January 2022, were as follows:

FIXED-RATE MORTGAGE PILOT SCHEME
Fixed-rate Period Gross Mortgage Rate (GMR) Full/Partial Prepayment Penalty (% of the Prepaid Amount)
Fixed interest rate GMR After the Fixed-rate Period
10-year 1.99% The then prevailing fixed mortgage rate or Hong Kong Prime Rate minus 2.35%

1st year: 3%
2nd year: 2%
3rd year: 1%
15-year 2.09%
20-year 2.19%
Source: HKMC

After that, the new rates are announced monthly. Currently, the new fixed interest rates are as follows, based on the HKMC website:

  • For 10-year mortgage loans: 4.99%
  • For 15-year mortgage loans: 5.14%
  • For 20-year mortgage loans: 5.29%

The application period is from October 3, 2023, until further notice. The drawdown period is within two months upon receipt of the application by the bank.

New mortgage lending plunging

New residential mortgage loans approved fell sharply by 53.3% to 4,369 in March 2024 as compared to 9,364 in the same period last year, according to the HKMA figures. Likewise, the value of newly approved residential mortgage loans plunged 57.6% y-o-y to HK$19.05 billion (US$2.44 billion) in March 2024.

The secondary market accounted for about 51% share of all new mortgage loans approved during the period. The primary market and refinancing accounted for 34.6% and 14.4%, respectively.

Due to a decline in new loans, the value of mortgage loans outstanding increased only by a meager 1.8% to HK$ 1.85 trillion (US$237.23 billion) in March 2024 from a year earlier, following growth of 2.5% in 2023, 4.2% in 2022, 9.8% in 2021, 7.8% in 2020, and 9.8% in 2019, based on figures from the HKMA.

The average loan-to-value (LTV) ratio of newly approved loans stood at 60.1% in March 2024, slightly down from 60.3% in the previous month but up from 59.6% a year earlier.

Over the same period, the mortgage delinquency ratio remained low at about 0.06 to 0.09 while the rescheduled loan ratio was unchanged at 0.00%.

As a percentage of GDP, the size of the mortgage market was equivalent to about 62.9% in 2023, down from 64.4% in 2022 but still the second-highest level ever recorded.

Hong Kong Residential Mortgage Loans graph

Rental yields gradually increasing, but still low by international standards

While Hong Kong’s rental yields are gradually rising, they remained extremely low by international standards, which can be attributed to the surge in property prices in the past decade. Hong Kong is not a ‘typical’ market. It is a place where the rich choose to park assets in the form of apartments, as part of a diversified asset-safeguard strategy - like Monaco and Singapore. Such markets typically have lower rental yields than more ‘normal’ housing markets.

Hong Kong Rental Yields graph

Rental yields in Hong Kong in February 2024:

  • Property Class A (properties with an area of 40 sq. m. and below) rental yields were 3.3%, up from 2.7% a year ago and 2.4% two years earlier, according to figures from RVD.
  • Property Class B (40 to 69.9 sq. m.) rental yields stood at 2.9%, up from 2.3% in the previous year and 2.2% two years ago.
  • Property Class C (70 to 99.9 sq. m.) rental yields were 2.6%, higher than the 2.2% a year earlier and 2.1% two years ago.
  • Property Class D (100 to 159.9 sq. m.) rental yields averaged 2.4%, up from 2.1% in both February 2023 and February 2022.
  • Property Class E (160 sq. m. and above) rental yields were 2.3%, up from 1.9% a year earlier and 2.1% two years ago.

This is supported by the recent Global Property Guide research conducted in January 2024, which showed that the average gross rental yields in Hong Kong stood at 3.39% in Q1 2024. Over the same period:

  • In New Territories, gross rental yields for apartments ranged from 2.31% to 4.68% in Q1 2024, with a city average of 3.22%.
  • In Kowloon, apartments offer rental yields between 2.15% and 5.13%, with a city average of 3.51%
  • In the Outlying Islands, rental yields ranged from 3.21% to 3.71%, with a city average of 3.35%.

Hong Kong Residential Prices vs Rents graph

Rental rates movements

Rents vary considerably in Hong Kong, with bigger-sized apartments showing stronger rent increases as compared to smaller-sized apartments. 

In Q1 2024:

  • Rents for apartments smaller than 40 sq. m. were up by 3.6% from a year earlier, to an average of HK$ 461 (US$ 59) per sq. m per month.
  • Rents for 40-69.9 sq. m. apartments rose by 4.3% y-o-y, to HK$ 387 (US$ 50) per sq. m. per month.
  • Rents for 70-99.9 sq. m. apartments rose by 6.6% y-o-y, to HK$ 438 (US$ 56) per sq. m. per month.
  • Rents for 100-159.9 sq. m. apartments rose by 6.6% y-o-y, to HK$ 439 (US$ 56) per sq. m. per month.
  • Rents for apartments larger than 160 sq. m. were up strongly by 9.9% y-o-y, HK$443 (US$57) per sq. m. per month.
AVERAGE RENTS, Q1 2024
Property size Average rents (per sqm) Year-on-year change
Hong Kong Kowloon New Territories Hong Kong Kowloon New Territories
HKD USD HKD USD HKD USD % % %
Less than 40 sqm 461 59 414 53 324 41 3.6 9.5 8.4
40-69.9 sqm 387 50 362 46 266 34 4.3 11.0 7.3
70-99.9 sqm 438 56 361 46 258 33 6.6 6.2 4.5
100-159.9 sqm 439 56 356 46 255 33 6.6 4.4 4.1
Greater than 160 sqm 443 57 460 59 235 30 9.9 17.0 11.4
Sources: Ratings and Valuation Department (RVD), Global Property Guide

Residential construction shows some improvements early this year

Completions plummeted by 34.6% y-o-y to 13,852 in 2023, following strong growth of 47.1% in 2022, according to figures released by RVD.

During 2023:

  • Class A completions (properties with an area of 40 sq. m. and below) fell by 21% y-o-y to 7,806 units, following a surge of 88.2% in 2022.
  • Class B completions (40 to 69.9 sq. m.) dropped 39.1% y-o-y to 4,667 units last year, in contrast to an annual increase of 15.8% in 2022.
  • Class C completions (70 to 99.9 sq. m.) continued to fall by a huge 48.2% y-o-y to 1,060 units, following a 4.4% decline in 2022.
  • Class D completions (100 to 159.9 sq. m.) fell by 85.1% to just 157 units, after a growth of 322.5% in the prior year.
  • Class E completions (160 sq. m. and above) fell by 68.9% from a year earlier to 162 units, in contrast to a surge of 330.6% in the prior year.

Residential construction activity seems to be improving again this year. In the first two months of 2024, there were already 3,594 dwellings completed in Hong Kong, which was on track to surpass the completions recorded for the full year of 2022.

The stock of flats in Hong Kong totaled 2,986,000 units in 2023, up by 7.6% from 2,775,000 units in 2018, according to the Transport and Housing Bureau.

Hong Kong Completions graph

How to solve Hong Kong’s chronic housing shortage?

Increasing supply is the key.

“We are looking at a shortfall of at least 1,200 hectares of land to meet our future supply and demand, and this is not taking into account extra land needed to improve the living space of each individual,” said Task Force on Land Supply chairman Stanley Wong Yuen-fai.

The government recently unveiled Hong Kong’s first major reclamation project since 2003, at an estimated cost of HK$20.5 billion (US$2.62 billion). Scheduled for completion by 2030, it will reclaim 130 hectares off northern Lantau and extend Tung Chung´s new town to provide 49,000 flats for 144,000 people, plus 870,000 sq.m. of commercial floor area.

“It will greatly help solve the current shortage of housing,” said Financial Secretary Paul Chan. Besides this, the government’s 10-year housing strategy aims to provide land for 28,000 public flats annually, alongside 18,000 private homes.

Following Chinese President Xi Jinping’s call on Hong Kong to provide “more decent” homes for the poor, the HK government has recently unveiled a HK$26.4 billion (US$3.36 million) light housing project that plans to build about 30,000 temporary apartments over the next five years. This will give people an option to move out of cramped quarters, like the city’s infamous “coffin homes”, while waiting for public housing. However, the new scheme has faced public backlash because of its high cost and since it is seen as merely a band-aid solution to the city’s festering housing crisis.

The total housing stock stood at 1,256,722 units in early 2023, up by only 1.5% from the previous year, according to the RVD.

Hong Kong Housing Stock graph

HK economy growing modestly, tourism sector continues to recover

Hong Kong’s service-oriented economy grew by 3.2% in 2023 from a year earlier, in stark contrast to the contraction of 3.5% recorded in the prior year, according to government figures. To boost economic activity, the HK government unveiled a number of measures last year, including offering cash handouts to residents, cutting salaries tax, and attracting more workers and foreign investments.

In the first quarter of 2024, the HK economy recorded a moderate growth of 2.7% over a year earlier, its fifth consecutive quarter of year-on-year growth. On a seasonally adjusted quarter-on-quarter basis, real GDP grew by 2.3% in Q1 2024.

Overall, the government forecasts the HK economy to grow further by 2.5% to 3.5% this year.

“Looking ahead, exports of services should be supported by the further revival of inbound tourism alongside the continued recovery of handling capacity and the Government’s efforts to promote a mega event economy,” said the government. “Geopolitical tensions and tight financial conditions will continue to affect exports of goods, but some slight improvement may be seen as external demand has held up relatively well so far.”

During 2023, the total value of exports of goods fell by 7.8% while imports dropped 5.7%, resulting in a trade deficit of HK$467.6 billion (US$59.85 billion), which was equivalent to 10.1% of the value of imports of goods. Then in Q1 2024, Hong Kong’s total value of exports increased by 11.9% y-o-y while imports rose by 8%. This resulted in a trade deficit of HK$83.6 billion (US$10.7 billion) in Q1 2024.

Tourism continues to recover. During 2023, visitor arrivals in Hong Kong reached 34 million people, more than 56 times from arrivals recorded in the prior year, according to figures from the Hong Kong Tourism Board (HKTB). Nearly 79% of the total number of arrivals came from Mainland China.

Then in the first two months of 2024, arrivals soared further by 299.2% to 7.83 million people as compared to the same period last year. Visitors from Mainland China surged by 348.2% y-o-y to 6.23 million over the same period.

In February 2024, the average hotel room occupancy rate stood at 86%, up from 85% in the previous month and 78% a year earlier, according to the Culture, Sports and Tourism Bureau.

Tourist arrivals averaged about 56 million people annually from 2011 to 2019. However, tourism became almost nonexistent in the following three years due to pandemic-related travel restrictions. Arrivals dropped to 3.57 million people in 2020, and then to just 91,398 people in 2021 and 604,564 people in 2022.

Hong Kong Visitor Arrivals graph

The HK economy suffered greatly for most of 2019 from social unrest as well as the US-China trade tensions, and for the whole year of 2020 from the COVID-19 pandemic. In 2020, real GDP contracted by about 6.5% from a year earlier, following a decline of 1.7% in 2019. When the first COVID-19 case was detected in January 2020, the HK government immediately rolled out social distancing measures and travel restrictions, putting further strain on the already ailing economy.

The HK economy grew by an annual average of 3.8% from 2000 to 2018.

Hong Kong GDP Growth and Inflation graph

In March 2024, overall inflation stood at 2%, slightly down from 2.1% in the previous month but up from 1.7% in the same period last year, according to the Census and Statistics Department. Hong Kong’s inflation rate averaged 3.3% from 2010 to 2019 before slowing sharply to 0.25% in 2020. Then inflation rose again to 1.6% in 2021, 1.9% in 2022 and 2.1% in 2023.

Unemployment remains low. In Q1 2024, the seasonally-adjusted unemployment rate was 3%, up from 2.8% in the previous quarter but still slightly down from 3.1% a year earlier, based on figures from the Census and Statistics Department.

Hong Kong Unemployment Percentage graph

Sources:

Hong Kong - More data and information