What beat inflation in the first half? Property up 13%, MPF barely 0.01%

In this year’s first half, the Hang Seng Index fell 2.8% and MPF as a whole returned just 0.01% — five percentage points behind inflation. Second-hand home prices, up 13% in six months, were among the few assets that genuinely beat inflation.

Why did property outrun inflation?

Under negative real rates, owners have no urge to sell. Headline inflation has hit 5.2% annually, with some economists warning it could worsen to 7–8% in the second half. If inflation stays at 5%, cash loses half its purchasing power in about 12 years; with deposit rates near zero, the real return is close to minus 5%. Against that, a 13% half-year price gain — plus roughly 3% rental yield — looks compelling. As long as inflation may worsen and deeply negative real rates persist, owners see little reason to cash out: where would the money go?

So should you buy property to beat inflation?

Buying now carries real risks. Prices are at or above their 1997 peak, rates are more likely to rise than fall, and government cooling measures add policy risk. Tighter mortgages are also turning home-buying into a rich person’s game: as Cheung Kong’s Victor Li put it, those who don’t need to borrow can pick their favourite flats, while ordinary buyers and upgraders get squeezed. The market adage holds — the poor fear inflation, the rich fear deflation: in inflationary times, asset owners can hedge and grow wealth, while wage growth for everyone else trails prices.

To compare how MPF funds fight inflation, visit MPF fund comparison.