The smallest affordable housing market in the world is on track.

Hong Kong house prices have fallen by more than 6 percent since the August high, with no rapid recovery in sight as residents leave the city at a record pace.

Some analysts predict another 20 percent collapse in 2025 due to rising interest rates and a slow economy.

Even consistently strong local agents expect prices to be slow for most of the year.

Sales activity fell to a two-year low and COVID-19 bans ruined this prospect. Property owners hope that the sinking is not a sign of coming more pain, because the city is closer to Beijing and its future as a financial capital is questionable.

"I've never seen the real estate market so quiet in more than 15 years of buying and selling," said Ada Chan, 42, who is trying to sell her three-bedroom apartment near Hong Kong University. .

The area has been on the market for over a year, which is a remarkable time in a city where residents approach real estate investments with religious fear.

Chan bought a 500-square-foot apartment for HK $ 17 million ($ 2.17 million) in 2018 and believed it would cost HK $ 18.5 million if he bought it. Now he is ready to take what he paid for. "I was just hoping it would be a draw," he said.

"The market usually has an impact on the price of COVID-19," Chan said. "It is the political situation and economic uncertainty that are making buyers hesitant, as are rising interest rates."

But Ivan Wong, director of sales for United Properties, says he thinks the recent downtrend is entirely related to COVID.

He believes there is a hidden need to accelerate transactions in the coming weeks. "There is so much that is not known about rising real estate prices in the short term," Wong said, adding that he saw growth potential in the fourth quarter. Hong Kong is one of the few cities in Asia where real estate growth appears to be on the ice, and the peg of the Hong Kong currency to the dollar means local prices will rise. Meanwhile, US and British property prices continue to rise in the face of rising loan interest rates.

After a remarkable increase in the last two decades, sellers are not used to benefiting from their investment in Hong Kong-owned real estate. The value of townhouses has risen 449 percent since the fall of 2003, compared to about 100 percent in the United States. Last year, an apartment in the exclusive Peak area reached a record of $ 640 million.

Many are still doing well. More than 95 percent of the apartments sold in January cost more than the owner originally paid, even though it is the lowest figure since 2010, according to Ricacrop Properties Ltd.

This means that some are still happy that they will receive less than they expected.

David Gibson, a 49-year-old logistics expert from New Zealand, bought his two-bedroom apartment in Mid-Levels in 2013 for HK $ 12.5 million and then spent HK $ 1.4 million on renovations.

In December, he named an apartment of 1,300 square feet for HK $ 24.5 million, but since then he has seen only 10 and there have been no offers.

"This is the worst time possible to launch the house," he said. He said any offer north of HK $ 23 million would be a good offer for him, even if he was in no hurry. He does not plan to leave for another five years, but wants to transfer his own property.

Reducing the number of potential buyers will not speed things up.

People began to reconsider their stay in Hong Kong after pro-democracy protests erupted in 2019. In response to political activism, Beijing passed a national security law banning speeches and demonstrations. . Hong Kong then imposed strict quarantine measures and requirements to try to fully maintain COVID-19 in the city.

However, efforts collapsed when the Omicron variant affected a population in which about half of the elderly were not vaccinated, bringing the total number of coronavirus-related deaths to more than 8,800.

Eagle Fung was one of many Hong Kong residents who left. Fung retired in his late 50s and reduced the price of his apartment in Kowloon to HK $ 4.4 million. He wants to sell before moving to the UK with his family this summer. The growing influence of the Chinese government in Hong Kong society has forced his family to rethink the future, Fung said.

"You are not fighting the country as an ordinary citizen," he said, reflecting the views of residents who were disappointed by the outcome of the protests three years ago.

"If you can't change the government, you can change yourself and choose the path that suits you."

He was willing to cut the price by a few percent, which would still bring a big profit, because he bought the property for less than a quarter of what he demanded. He did not receive any offers he considered reasonable.

In a city where apartments are almost larger than a parking space sold for $ 645,000 and parking spaces alone cost more than $ 1 million, officials are vying for construction to facilitate supplies. The number of new homes being built in Hong Kong this year could rise to its highest level since 2005, according to Bloomberg Intelligence.