Pessimism abounds in Hong Kong’s property market even as interest-rate outlook improves

Hong Kong home prices are likely to see a decline of between 3 per cent and 10 per cent next year, according to market estimates

Property agencies Midland Realty and Ricacorp are optimistic, as they expect an upside of as much as 8 per cent in prices next year

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A view of residential buildings in Hong Kong’s Tseung Kwan O area. Photo: Sun Yeung

Published: 8:00am, 18 Dec 2023

Hong Kong may have seen the last of the interest rate hikes in the current tightening cycle, sparing homebuyers from higher borrowing costs, but analysts warn this may not prevent property prices from slipping further.

Despite the positive interest rate outlook, home prices in the city will drop next year, with a best-case scenario of up to 3 per cent by CGS-CIMB Securities and by as much as 10 per cent by UBS.

Rising demand from mainland Chinese buyers following the government’s easing of cooling measures and rising rental yield should provide downside support for home prices in Hong Kong, according to Raymond Cheng, managing director and head of China and Hong Kong property at CGS-CIMB Securities.

This should also bode well for the share prices of Hong Kong-focused developers, he added.

Properties are listed for sale at an agency in Quarry Bay. Photo: Elson LI

The Hong Kong Monetary Authority (HKMA) maintained its base rate at 5.75 per cent on Thursday, after the US Federal Reserve held interest rates steady and signalled that the historic monetary policy tightening engineered over the last two years may have ended and lower borrowing costs were coming in 2024. The HKMA has followed the Fed in lockstep since 1983 on interest rates policy by design under its linked exchange rate system to preserve the local currency peg to the US dollar.

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