Hong Kong property market escapes “bubble risk” zone, but still considered overvalued: UBS


20th September 2023 – (Hong Kong) According to the latest edition of the UBS Global Real Estate Bubble Index for 2023, the Hong Kong property market has successfully moved out of the “bubble risk” zone. However, despite this positive development, property prices in Hong Kong have experienced a 7% decline from mid-2022 to mid-2023 after adjusting for inflation, bringing them back to levels last seen in 2017.

The current bubble index score for Hong Kong stands at 1.24, classifying it as an area of “overvaluation” and causing it to drop to the 6th position in the ranking.

The UBS Global Real Estate Bubble Index tracks residential property prices in 25 major cities worldwide. The report highlights the significant decline in imbalances in the housing market over the past two years due to high global inflation and soaring interest rates. On average, property prices in these cities have experienced a 50% decline after adjusting for inflation between mid-2022 and mid-2023. The report warns that if interest rates remain high, further price decreases may occur.

Last year, nine cities, including Hong Kong, were categorized as “bubble risk” areas. However, in the latest report, only Zurich and Tokyo remain in that category, with bubble index scores of 1.71 and 1.65, respectively, ranking first and second.

In contrast, the two cities with the highest risk scores in the previous year’s report, Frankfurt and Toronto, have experienced a 15% decline in actual property prices over the past four quarters, resulting in their rankings dropping to the 5th and 7th positions, respectively.

Singapore has seen a 15% increase in actual property prices since 2018. However, UBS classifies Singapore as having “fair value,” partly due to a significant 40% surge in local rents during the same period.

While the UBS report suggests that the Hong Kong property market is no longer at risk of a bubble, it emphasizes that property prices in the city remain disproportionately high, indicating the need for continued monitoring and caution.