Costing above US$20,000 per square meter, Hong Kong real estate could stay Asia’s most expensive. We think prices are about to come tumbling down regardless though.

1. Major Economic Issues in Hong Kong

Despite its status as East Asia’s top financial center, Hong Kong’s economy is struggling due to several factors – both financial and political in nature.

A looming trade war between China and the United States is at the forefront of any list that includes Hong Kong’s economic issues.

This feud has not solely impacted China’s (and thus, Hong Kong’s) manufacturing and growth numbers. It has harmed Hong Kong’s business confidence and international reputation too.

You might ask “what does the trade war have to do with Hong Kong real estate?”. The answer is “everything”. Trade and finance are the city’s main drivers of economic growth, and yes, its property values as well.

Any problem that affects Hong Kong’s wider business prospects will eventually impact its real estate sector. Falling corporate profit lead toward unemployment, less expat housing demand, and other negative consequences for property values.

Furthermore, even putting aside a trade war with the United States, Hong Kong’s economy is rather weak in general.

The port of Hong Kong, once China’s busiest in terms of cargo tonnage, isn’t even in the world’s top ten anymore. Six different Chinese ports on the mainland are now outranking Hong Kong as exports slump.

I could write an entire article about Hong Kong’s economic problems. But I’ll move on since this post is instead about why you shouldn’t buy property in the city.

2. Beijing’s Assertiveness Worries Investors

Until lately, Hong Kong real estate served as a storage of wealth for mainland Chinese buyers who are rich enough to afford it.

Having its own government, press freedoms, lack of censorship, along with GDP per capita far above mainland China’s makes Hong Kong truly unique.

It’s part of China yet distant from social and functional issues in the mainland.

Beijing has unfortunately begun stretching its influence and diminishing many of the positive aspects that led to Hong Kong’s success in the first place. As a result, corporations and private investors alike are becoming anxious.

Multinational firms oftentimes can’t freely state their opinions on this matter. Bluntly saying “Beijing needs to back off, or else we’re leaving” would be horrible for business at best – and illegal at worst.

However, that’s exactly what the mood appears like behind closed doors. Expats want out of China.

A worrying combination of the trade war, strict political control, rising costs, and strong home-country bias is causing investors to leave both Hong Kong and the mainland in droves. That’s evidenced by countless polls and a drop in FDI across the board.

Needless to say, fewer expats means declining foreign investment and less housing demand.