HK Housing Rental Index keeps falling

Good news to tenants in Hong Kong, if you are looking for a housing unit to rent or bargaining tenancy renewal recently, you may be interested in knowing more about the recent trend of rent reduction! According to the latest release of the housing rental index of April 2020, it continues to fall with an annual decline of about 7%. (Figure 1) This of course has not included the shock caused by the National Security Law of Hong Kong at the end of May. The April index mainly reflects the impact of the COVID-19 pandemic on the property market. Besides reducing housing demand, it also vacates a lot of Airbnb and guesthouses, which are converted back to the ordinary supply of housing. It is also noted that all the five classes of housing (represents various flat size housing units) decline, reflecting that the cause was not the change in the supply and demand of certain types of units, but a shock on the overall market. Moreover, rental falls are leading to price falls. (Yiu, 2020).

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Figure 1 The annual changes of the five types of housing rental indices from April 2018 to April 2020. Source: Rating and Valuation Department

Comparing the last two cycles of larger declines were the 1997 Asian financial turmoil and the 2008 international financial turmoil. The current rental decline cycle had smaller growths before the decline. In terms of yoy increase, the rents before the two crises in 1997 and 2008 both increased by about 20% (Figure 2, Figure 3), while the declines reached about 30%, but the latest increase was only less than 10%, which seems to be much weaker.

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Figure 2 Changes in housing rental index from 2007 to 2009
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Figure 3 Changes in housing rental index from 1997 to 1999

In addition, the last two decline cycles have been completed within one year, and then the index resumed the upward trend, but the latest decline trend has lasted more than one and a half years, but there are still no signs of recovery. With major political events such as the US-Hong Kong Policy Act, coupled with the global economic recession, the probability of a continued decline in the coming months is quite high, and the current decline cycle may be much longer than the previous two.

It is true that in today ’s fiat money world, many people can afford to buy or rent houses at a higher price with an aim to manipulate the price and rental indices, especially when the national team joins the market game. It may explain why the fall so far is not large, but in general, when unemployment rises, income decreases, the economy deteriorates, tourists do not come, and the government’s policy is to make enemies everywhere, then the real demand of housing will inevitably decline and the risk will deter people from coming.


姚松炎 (2020) 【財經論壇】港樓勢危 樓價下跌四大原因,蘋果日報,3月25日。

ecyY is the Founder of Real Estate Development and Building Research & Information Centre REDBRIC

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