Headwinds that triggered the three corrections in the city’s home prices from 2005 to 2016 are now all in play, analyst says
Hong Kong home prices will drop 15 per cent over the next 12 months, investment bank CLSA said, joining an increasing number of financial institutions predicting drops in the world’s most unaffordable housing market.
“Hong Kong’s property market is having its worst combination of fundamentals in 15 years with rising interest rates, a slowing economy and depreciating yuan,” wrote Nicole Wong, regional head of property research at CLSA, in a report released on Monday. “Sentiment could deteriorate at any time as prices are unaffordable.”
Hong Kong’s housing prices have risen for 27 straight months.
CLSA joined Citibank and UBS in predicting a sharp downturn, saying the city faces “the worst headwind in 15 years”.
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Wong noted that the headwinds that triggered the three corrections in the city’s home prices from 2005 to 2016 – a mortgage rate rise, a global financial crisis and yuan depreciation – are now all in play.
“Hibor is approaching 2 per cent, from under 1 per cent for most of the past nine years,” wrote Wong. “The 17 per cent correction in the Hang Seng Index indicates a slowing economy, while [the] yuan has depreciated 9 per cent so far.”
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Often used as a reference of mortgage rates, Hibor, or Hong Kong interbank offered rate, had its one-month rate hitting a 10-year high of 1.6 per cent in mid-June, while the three-month rate amounted to 2.01 per cent under a liquidity squeeze in the banking sector.
