Over the past five decades, Hong Kong’s property market has endured three significant bear markets, including the one currently underway. The previous downturns occurred in the early 1980s, fueled by uncertainty over Hong Kong’s future, and between 1997 and 2003, driven by two financial crises and the SARS outbreak.
At present, property prices have declined approximately 28% from their historical peak. This downturn closely mirrors the first major bear market in the early 1980s, during which prices fell by 32% (Exhibit). If this pattern persists, the current market may be nearing the peak of its cumulative decline, reflecting the trajectory of the earlier downturn.
That said, the total decline during the first bear market was considerably less severe than the second, where property prices plummeted by 66.5% between 1997 and 2003. A crucial factor behind this disparity was the nearly 30% depreciation of the Hong Kong dollar during the latter period, which accelerated the adjustment process. When accounting for currency depreciation, the first bear market’s cumulative decline reached approximately 54%.
Globally, major housing bubbles—such as those in Japan during the late 1980s and Ireland following the Global Financial Crisis—have often resulted in price collapses exceeding 50%. Even Hong Kong’s second bear market recorded a peak-to-trough decline of 66.5%, well above this threshold.
In light of this historical context, unless a significant depreciation of the Hong Kong dollar—or a potential unpegging of the USD/HKD exchange rate—accelerates the adjustment, the current bear market likely has further room to fall. Assuming a cumulative decline akin to previous cycles, property prices could drop an additional 30% from current levels before finding a stable floor.
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