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Hong Kong property
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Hong Kong property: cash is king as rate hikes, capital depreciation raise the bar on investment returns

  • Property investment loses appeal as homebuyers, investors get better returns from keeping cash in time deposits
  • Analysts at Wall Street firms, real estate consultancies and agencies are still divided on price recovery prospects in 2023

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A general view of Tai Koo area in Quarry Bay., Hong Kong. Photo: Martin Chan
Lam Ka-sing
Hong Kong’s economic troubles and higher bank deposit rates are raising the bar on property investment returns in the city, persuading homebuyers and speculators alike to hold onto their cash for now, according to industry analysts.
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Interest rates have risen since last March as the Hong Kong Monetary Authority lifted its base rate in lockstep with US hikes, prompting some commercial banks in the city to raise their lending and deposit rates to levels last seen more than two decades ago.

Fubon Bank, for example, last month offered up to 5.1 per cent interest on 12-month deposits of at least HK$200,000 (US$25,600). Annual rental yields on typical flats measuring up to 430 sq ft in Hong Kong have slipped below 3 per cent on average since August 2016, according to government data, while home prices retreated 17.3 per cent from an all-time high in August 2021.

“When people see weaker [property or] asset prices, they will say cash is king,” said Lee Shu-kam, head of economics and finance department at Shue Yan University. “So I will be pessimistic” on the industry outlook, he added.

Fubon Bank offers as much as 5.1 per cent annual interest on 12-month deposits. Photo: Handout
Fubon Bank offers as much as 5.1 per cent annual interest on 12-month deposits. Photo: Handout

That suggests the slump in Hong Kong’s property market activity is not about to reverse soon. Home transactions fell last year to a 27-year low of 45,050, according to data compiled by Centaline Property Agency. Deals involving residential properties liable for extra stamp duties shrank 42 per cent to 2,972, the least since government records began in 2014.

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