Editor's note:Hong Kong’s moves to lift its battered property sector may have brought some respite for homeowners. But, as Zhang Tianyuan reports, analysts are split over what future trends will be, citing the city’s ability to maintain its financial strengths and a shifting demographic makeup.

Amodest uptick in residential home prices, driven by the special administrative region government’s move to give Hong Kong’s battered property market a new lease of life, seems to have allowed owners who had bought their homes in the past few years to breathe a sigh of relief.

Many of them have seen the value of their apartments plummet by about 20 percent since 2021 as the COVID-19 outbreak approached its height, leaving many who have sunk their life savings into the world’s most expensive housing market in a quandary — bundled with negative equity.

According to the Hong Kong Monetary Authority — the city’s de facto central bank — the estimated number of residential mortgage loans in negative equity surpassed 30,000 by the end of March, a more than threefold surge since September. The aggregate value of these loans climbed to HK$165.3 billion ($21.16 billion) from HK$59 billion during the same period.

However, there are always two sides of the same coin — deep-pocketed buyers with funds are now able to take the plunge and climb the property ladder given the more affordable prices.

Analysts say the SAR’s strengths and pluses in financial services and educational resources have given the beleaguered market a lift, drawing global professionals and talent seeking long-term residence and employment in the city.

“I have seen the value of my apartment slump 10 percent since I bought it in late 2019,” says a homeowner surnamed Zhang, who purchased a 760-square-foot (70.6 square meters) second-hand flat at Lohas Park in Tseung Kwan O, the New Territories, at below market prices.

The 35-year-old says he isn’t hurting. “Since the depreciation hasn’t been realized in cash, the impact is not too severe.”

According to real-estate services provider Centaline Property, apartments at Lohas Park are going for HK$13,113 per square foot at present — down 26 percent from their October 2021 peak.

Hong Kong’s once sky-high home prices, which have generated staggering household wealth over the years, now have investors and homeowners alike worried. The price slump has had a far-reaching impact not only on homeowners but also on the city’s economic growth. Land sales in the past three decades have made hefty contributions to the SAR government’s coffers, taking up roughly one-fifth of its total revenue before falling to only 7 percent in the first half of last year. Reserves generated from land sales and other property transactions have been a key source of funding for residents’ social welfare benefits, such as transport and healthcare subsidies.

With the city facing a significant shift in its demographic makeup amid a rapidly graying population and a growing number of mobile residents hesitating about buying a home, the housing market has to deal with new challenges. Many are pondering over the future direction of the property sector.

The SAR government’s decision in February to scrap all extra taxes on homebuyers, coupled with developers’ discount incentives for new projects, has buoyed buying sentiment. Zhang bought his second apartment for rental at The Coast Line II in Yau Tong in August after billionaire Li Ka-shing’s flagship developer, CK Asset Holdings, sold the first batch of units at the complex at much lower prices than the city has seen in the past seven years.

Data from the Rating and Valuation Department showed private home prices rose for the second consecutive month in April, increasing 0.3 percent from March.