Goldman Sachs Hong Kong home price forecast of 30 per cent drop too bearish, JP Morgan analyst argues

The most pessimistic forecasts of a 30 per cent decline are ‘fundamentally wrong’, JP Morgan analyst says

The US investment bank believes the decline will total 20 per cent by May 2023 from a peak in August 2021

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A woman walks past a property agency in Hong Kong’s Quarry Bay neighbourhood on December 1, 2022. Photo: K.Y. Cheng

Published: 10:44am, 2 Dec 2022Updated: 10:54am, 2 Dec 2022

Predictions of a 30 per cent drop in Hong Kong home prices by the end of 2023 are too pessimistic, according to JP Morgan.

Goldman Sachs in October forecast that prices would fall by 15 per cent in both 2022 and 2023. But JP Morgan believes the decline will total 20 per cent by May 2023 from a peak in August 2021. The full-year price decline in 2023 will be 8 per cent, mostly concentrated in the first half of the year, it said in a report released on Wednesday.

The view that home prices would correct by 30 per cent based on the median formula was “fundamentally wrong”, Cusson Leung, JP Morgan’s head of Hong Kong property research, told the Post on Thursday.

The most pessimistic forecasts, Leung said, assumed that if mortgage payments increased, home prices would have to drop by enough to maintain the affordability ratio – the ratio of mortgage payment to median household income.

Kai Chuen Court, a public housing estate in Diamond Hill, pictured on October 19, 2022. Photo: Jelly Tse

“I think fundamentally, that is very different from what happened in reality,” he said.