Hong Kong's unemployment rate surged to a nine-year high
According to global property consultant JLL's recently released Residential Market Monitor Report, Hong Kong's unemployment rate has increased progressively to a nine-year high amid the COVID-19 pandemic and social tension. The rising unemployment rate in the city is putting pressure on local housing prices.
Figures from JLL historically show, housing prices fell by 50%, while unemployment climbed from 2.1% to 5.2% during the Asian Financial Crisis in 3Q97-3Q98. The housing prices also dropped 30% when unemployment rate increased from 4.4% in 4Q00 to 8.5% in the 2Q03. With the recent continuous rise in unemployment, JLL's mass residential capital value index has also dropped by 6.1%, from its peak in July 2019.
According to the Census and Statistics Department, the unemployment rate in the city has increased from 2.8% in June 2019, to 3.7% in February 2020. Among the major industries, retail, accommodation and food services suffered the biggest hit, with the unemployment rate reaching 6.1% from 3.4% just a year ago, following the social tension since 2019, and more recently, the COVID-19 outbreak.
Henry Mok, Senior Director of Capital Markets at JLL in Hong Kong said, "As the current state of unemployment is mostly concentrated in the lower-income segment, the impact on prospective buyers remains relatively small. However, as economic activities stall due to the COVID-19 pandemic, a sharp downgrade of global economic growth, including that of Hong Kong, becomes inevitable."
Nelson Wong, Head of Research at JLL in Greater China also commented, "As recession in Hong Kong deepens, higher unemployment will likely erode housing demand as some prospective buyers retreat, while more owners may choose to sell, tilting the market dynamics to favor buyers more."
"We continue to expect home prices to fall by 10-15% in 2020. The downside risks appear higher, given uncertainties about the duration of the outbreak," he added.
The unemployment rate and the JLL Mass Residential Capital Value Index have always shown a strong correlation.