Rent purchase inversion+wealth effect, Hong Kong's urgent need for "subletting for buying" boosts the real estate market!

Against the backdrop of Hong Kong's property market recovery, first-time buyers' purchasing behaviour has shifted. The intensifying rent-to-buy disparity coupled with the release of wealth effects has driven first-time buyers to ‘switch from renting to buying’, becoming the key driver behind December's surge in residential property registrations.

Data indicates Hong Kong residential rents have risen for three consecutive years, accumulating a 4.84% increase in the first eleven months. Meanwhile, declining mortgage rates have increased instances where mortgage payments are lower than rent, prompting tenants to seize the opportunity to enter the property market and injecting vitality into the sector.

The deepening rent-to-buy disparity lies at the core of this shift in first-time buyers' attitudes. Three consecutive years of rising rents have increased tenants' living costs, with the cumulative 4.84% increase in the first eleven months exacerbating the pressure of long-term renting; Conversely, declining mortgage rates have eased the burden of home purchase repayments, leading to more instances where mortgage payments are lower than rent. This reversal in costs has altered tenants' decision-making logic, with previously hesitant essential buyers redirecting their rental budgets towards down payments, initiating the shift from renting to buying.

The wealth effect provides financial backing for this shift from renting to buying. Economic recovery on the mainland and market improvement in Hong Kong have boosted household wealth, enhancing the income stability and purchasing power of essential homebuyers. Concurrently, the property market's recovery has restored market confidence, strengthening these buyers' expectations for asset preservation and appreciation. Consequently, they no longer settle for renting but increasingly favour homeownership to fulfil dual needs: securing accommodation and diversifying assets while mitigating rental inflation risks.

This shift from renting to buying by essential demand groups directly boosted December's residential property registrations. As the main drivers of transactions, the concentrated release of essential demand has generated tangible increases in actual sales. This not only confirms the sustained recovery of the property market but also optimises the market demand structure—reducing reliance on investment demand and laying the foundation for stable and healthy property market development.

Whether this trend persists hinges on rental versus purchase costs, mortgage rate trajectories, and the broader economic environment. Should mortgage rates stabilise at low levels and rental increases remain contained, the impetus for homeownership will endure. Conversely, rising mortgage rates or economic volatility could erode first-time buyers' confidence. The SAR government may optimise housing supply and refine homeownership support policies to guide rational purchasing decisions, while first-time buyers themselves must make prudent choices aligned with their financial capabilities.