Hong Kong loves its property. Despite another fraught year and lingering coronavirus concerns, the local property market bounced back with a vengeance in 2021.

After some jitters and uncertainty early in the previous year, when the coronavirus was spreading and little was known about it, the residential real estate sector bottomed out. At this time in 2020 markets were trending up again, as if preparing for a buying frenzy in 2021. And guess what? That’s exactly what happened.

Residential sales in the first two quarters of 2021 were strong across the board. The Rating and Valuation Department reported prices in the mid-market grew 4.7 per cent (for flats sized 430 to 752 saleable square feet) and 5.8 per cent (up to 1,075 square feet) between 2019 and July 2021, with demand for small units slipping. That trend started when the Hong Kong Monetary Authority relaxed lending caps in October 2019, but it intensified in the wake of Covid. At the upper end of the residential sector, the first two quarters of 2021 were as active as they’ve ever been, and Habitat alone experienced growth in both sales and leasing: up 42 per cent and 28 per cent from 2020 respectively.

Things cooled off in the third quarter when the Evergrande Group debt crisis really exploded in October and caused investors, shareholders and the central government in Beijing to sit up and take notice. The Evergrande quagmire threw a dampener on Hong Kong’s sentiment-driven market, making investors cautious in light of how the banks may be exposed to the developers massive debt.

That said, authorities in China are unlikely to let the Evergrande fire rage out of control and drag down the entire sector. Coming up on the end of the year, traditionally a quiet period that doesn’t really activate again until after Lunar New Year, prices mostly stabilised – flattening rather than falling – and prospective buyers exercised their conservative muscles.

But look ahead, and the markets are poised for more of the same in 2022. Investors and end users alike will be wrestling with the same four factors they always have, chief among them high demand and low supply, particularly in the luxury sector.

First up, interest rates. One of the fundamentals that has underpinned residential transactions for years is not going to change. A hike in interest rates has been the fear every year for the last 15 years and it hasn’t happened. It’s not likely to any time soon, and if rates do go up, the lowly quarter or half point won’t take us out of a low interest rate environment.

Second, a generous amount of liquidity remains in Hong Kong; the banks have had a banner year, as has the stock market. That’s going to carry into 2022. Third, we’re all here. As long as travel restrictions remain in place, we’re not going anywhere and buyers are looking to make the most of their homes. Finally, the fourth factor, supply and demand, is a familiar one.

In 2021 luxury activity was concentrated in the HK$60 million (US$7.7 million) to HK$100 million range, but there could be a pivot to HK$100 million-plus if there’s no sign of a border opening. Prices will be propped up by the fact that there’s so little supply in the secondary market, and only Ansaldo in Shouson Hill and Central Peak in Mid-Levels are primary sales contenders in the short term.

There are speed bumps to watch for, however. Fresh measures that align with mainland housing policy could chill the market, and coronavirus is not going away: Europe is seeing another Covid spike, and now the Omicron variant is a looming challenge – and there are likely to be more variants down the road. While the current quarantine regulations have indeed insulated Hong Kong, they are also dampening sentiment and could continue to do so, potentially leading to an expatriate exodus out of Hong Kong in the summer as some residents prioritise their families. Executives could be temporarily relocated to places easier to come and go from for companies whose business and competitiveness relies on staff moving around.

Ultimately, though, Hong Kong’s property market has a way of adapting to shocks; it rolls with them far better than other global cities and moves on much faster. The lower Peak and upper Mid-Levels areas and Island South in particular are outperforming every other market sector right now, and spots like Red Hill, Regalia Bay and Tai Tam are bracing for a buzzy 2022 that could end in another 10 per cent in price gains. Nearly two years on from the shock of Covid and the market has recovered and surpassed 2019’s figures in many sectors. At the end of the day the SAR is still an important gateway to China, and its resilience will keep it that way.