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Sandy Li

Hong Kong home prices could slide as much as 10 per cent over the next 17 months, UBS said, mainly because of anticipated higher mortgage rates.
And the US-China trade war threatens to weigh down prices even more.
The UBS property team forecasts a drop of between 5 per cent and 10 per cent in home prices from now until the end of 2019, dented by the expected 50 basis points to 75 basis points increase in mortgage rates in the near future.
Citibank on Tuesday became the first major bank in the city to increase interest rates on home loans. Other banks may soon follow, ending 12 years of cheap borrowing.
Homeowners beware: Citibank first to raise mortgage rate in Hong Kong
“We project home prices to weaken,” UBS said in a new report by its property research team.
But that slide does not factor in potential fallout from the US-China trade war. If the trade war ends up being really nasty, the price skid could be worse, UBS said.


That is because historically the price local and foreign buyers are willing to pay for the city’s residential property has been closely tied to Hong Kong’s overall economic and employment health, the report noted.
While Hong Kong’s economy got off to a brisk start this year, the US-China trade war has created job uncertainty because the city acts as a re-export hub between the two countries and could be hit by higher costs.
How will Hong Kong be affected by the US-China trade war?
“The dampener on China and Hong Kong’s economies as a result of the trade war is likely to weaken property purchase sentiment in the city. Looking at historical downturns in Hong Kong’s housing market, for instance the property price fall in 1997 and 1998, we note all the major downturns were triggered by the economic shocks,” UBS said.
Is Hong Kong’s property market heading for its biggest crash since 1997?
Jobs in such sectors as transport, financial, insurance and some other professional services could be affected.




“If the trade war were to last over the medium term, it is likely to affect the job market in these respective industry sectors,” UBS said.
“In the past economic downturn, we noted changes in job market conditions, particularly the level of job security, immediately affected domestic sentiment of the existing as well new potential property buyers,” it said.
Prices of luxury homes in New Territories expected to dip as developers rush to offload stock
The UBS forecast comes three weeks after Citibank predicted Hong Kong home prices are likely to drop 7 per cent in the second half of the year.
The forecast also comes at a time when more residential property is coming onto the market.
More than 5,400 new flats applied for pre-sale consent last month, data from the Land Registry showed.




“It will be the largest number of new flats awaiting for pre-sale permit in the past 16 years,” said Buggle Lau Ka-fai, chief analyst at Midland Realty.
Meanwhile, developers have come under pressure to offload their completed, unsold flats at lower prices since a vacancy tax aimed at freeing up new flats and containing home prices was announced in June by Chief Executive Carrie Lam Cheng Yuet-ngor.
“A combination of factors – like the intensifying China-US trade war, a potential increase in interest rates and the government’s new housing measures to tackle the housing crisis – have made homebuyers take a wait-and-see attitude,” said Derek Chan, head of research at Ricacorp Properties.
Sales of homes in the secondary market fell for a second consecutive month, with 4,040 deals in July, down 7 per cent from June.
“Home seekers have deferred their buying decisions,” said Chan.


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Hong Kong property

Hong Kong home prices may slip as much as 10 per cent, UBS says

Higher borrowing rates to weigh on residential prices, group says, and US-China trade wars could be a further dampener in the city that acts as a re-export hub for the two countries

Hong Kong, pictured above, could see the US-China trade wars act as a dampener on its skyrocketing home prices. Photo: SCMP/Fung Chang

21-year high – Hong Kong property sales expected to touch US$51 billion in first six months this year

Buyers queue up for a property launch in Hong Kong. Between 2,000 and 2,500 apartments are expected to be sold in June. Photo: Jonathan Wong

Exterior view of Henderson Land Development's Cetus, Square Mile, on 18 Ka Shin Street in Mong Kok. The project will be launched on June 16, 2018. 15JUN18 SCMP / Felix Wong

Beware the big impending Hong Kong property bust

People queue up to buy a property at the old airport site in Kai Tak. Photo: Edward Wong

Chinese money floods into Hong Kong property, as Beijing set to check taxpayers’ foreign financial accounts

Long queues at the sales office of Cheung Kong Property Holdings' Ocean Pride at Fortune Metropolis in Hung Hom this month. Photo: Nora Tam

This picture taken on May 25, 2017 shows a resident (C) walking across the road in the Wonderland Villas hilltop residential complex in the Kwai Fong district of Hong Kong. Red-whiskered bulbuls start chirping around 5:00 am at Wonderland Villas, a hilltop complex in leafy northern Hong Kong whose own history charts the city's political, economic and social fortunes. Prices at Wonderland have risen, waned and risen again, as Hong Kong property has swung through boom and bust to become one of the world's most expensive markets. / AFP PHOTO / Isaac LAWRENCE / TO GO WITH Hong Kong-China-Britain-lifestyle-property-construction-urban-planning, FEATURE by Elaine YU

View of Sun Hung Kai Properties's Park Yoho Genova in Kam Tin, Yuen Long. 14JUN17 SCMP / Edmond So

Cooling measures could lead to Hong Kong property market ‘free fall’ after a downturn, consultants JLL warn

Transactions of used homes in 35 major private housing estates fell to 45 last week, the lowest in 19 weeks, according to Midland Realty. Photo: SCMP

Chief Executive Carrie Lam Cheng Yuet-ngor speaks to the press before attending an Executive Council meeting. 03JUL18. SCMP/ Jonathan Wong

Divisions grow as analysts debate Hong Kong property outlook

A consortium of Hong Kong and mainland Chinese buyers paid a record HK$40.2 billion (US$5.15 billion) for The Center in early November: Photo: Nora Tam

Property

Hong Kong & China

Business

Higher borrowing rates to weigh on residential prices, group says, and US-China trade wars could be a further dampener in the city that acts as a re-export hub for the two countries


Higher borrowing rates to weigh on residential prices, group says, and the US-China trade war could be a further dampener in the city that acts as a re-export hub for the two countries.


Hong Kong economy

US-China trade war