Winter, not spring, is coming for Hong Kong’s housing market, says DBS

The recent uptick in the city’s housing market should be viewed with caution, as improving sentiment could prove short-lived once the weight of the trade war and other headwinds factor back into view, according to new research from DBS Bank (Hong Kong).

Hong Kong’s housing market is set for a year or negative returns, with a likely drop of 10 per cent, according to the Singaporean bank, which believes there is little that can stop the correction in asset prices.

“When buyers realised that there are continuing uncertainties and gloomy outlook about global and regional economies, they will have second thoughts,” said Jeff Yau, a senior research director at DBS. “The market seems to be better just because it is not as bad as we think half year ago, it does not mean we are in good shape.”

In a sign of the looming slowdown, Hong Kong’s real GDP growth eased to 1.3 per cent in the fourth quarter last year, the lowest since the first quarter of 2016.

“If China-US dispute could not be resolved satisfactorily, China’s economy would face challenges with negative repercussions on Hong Kong’s economy,” Yau said, pointing to the impact prolonged trade tension between China and US would have on the world’s most expensive property market.

Among other headwinds, smaller developers are expected to offer steep price reductions in areas where large numbers of new homes are under construction, such as Tai Po and Tuen Mun.