Fear not the bear: There's a silver lining to lower home prices in Hong Kong

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Hong Kong has suffered a long time from ridiculously high property prices. A bear market may just be what the city needs to boost home ownership. Photo: AFP

Published: 1:26am, 13 Nov 2015Updated: 1:26am, 13 Nov 2015

There are strong signs pointing to a bear market in the property sector. Banks have been slashing valuations, while the more bearish analysts are pointing to a correction of 30 per cent or more in the coming years.

Even the city's top finance officials are warning of volatility ahead. Of course, no one can be certain about the future.

But interest rates are arguably the single most important influence in the property market. And the latest economic data coming from the United States indicate the US Federal Reserve is ready to raise rates next month for the first time in nearly a decade.

In the US, robust employment figures and annual wage growth have overcome market scepticism about the possibility a rate hike. With our currency pegged to the US dollar, borrowing costs in Hong Kong will rise as the US Fed starts to raise interest rates. That is bound to have a negative impact on local market sentiment.

The latest economic data coming from the United States indicate the US Federal Reserve is ready to raise rates next month for the first time in nearly a decade, significantly influencing the property market. Photo: Nora Tam

Lower valuations by banks mean people are offered smaller mortgages. Some sellers are already slashing prices in the secondary home market.