Hong Kong property market softens, prices could fall 40%

Hong Kong property market softens, prices could fall 40%

Projections that Hong Kong property prices could fall up to 40% is causing concern for investors.

Summary:

  • The economic downturn in China has created a domino effect on Hong Kong’s property market
  • Investors and developers are expected to be hit the hardest, with possible losses of up to 4%
  • Disappointing market outlook will lead investors to look for greater stability and higher returns elsewhere

Hong Kong housing prices will fall by up to 40% amid economic unrest in China, experts predict.

Housing prices have already been hit in part by the slowing economy in China spilling over to Hong Kong, with a steady price decline seen for four weeks straight and no reprieve in sight. The outlook is a far cry from the previous near-zero interest rates and escalating property prices that have defined the last decade.

Falling prices may not be the only problem that affect property developers and investors in Hong Kong. With high operational costs and pre-existent debt, rising US rates could further damage Hong Kong’s property market due to increasing funding costs and narrowing profits.

Tony Tsang, an Analyst at Deutsche Bank, said: “For the affordability ratio to return to a sustainable level of 50%, residential prices would need to fall 32%.”

Property developers in Hong Kong are predicted to suffer an earnings hit of between 1% and 3%, but it is investors and trusts that are expected to suffer greater losses. Their potential decline in earnings is projected between 2% and 4%.

The instability of the economy is making investors, who may once have looked to Hong Kong for a slice of premium real estate, to cast their gaze elsewhere.

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