Hong Kong has seen home prices slip by almost 10 per cent from a peak in August 2018 after a 15-year price rally as the increased supply, higher mortgage rates and a slowing economy have dampened demand.

Some analysts predict no let-up in the supply of new flats.

“This marked a 14-year high and the first time the number has surpassed the level of 20,000 in 14 years,” said Wong Leung-sing, senior associate director of research at Centaline Property Agency. “Future private housing supply will remain at about 20,000 for a long time.

“Now we see a ‘stable’ supply coming, the outlook for the housing market will depend on the demand, and that will be largely affected by the economic environment in Hong Kong and the global market. When the economy slows, home demand could be affected.”

Some 93,000 flats may become available in the next three to four years, including 9,000 that are already completed but not sold and 74,000 currently being built, according to the housing bureau.

The promising numbers would seem to support the view of many analysts that Hong Kong’s home prices will fall throughout 2019.

Nomura said home prices will drop by 7 per cent year on year, citing abundant supply from a variety of developers providing room for price cuts.

It was the fourth investment bank to correctly predict the market would lose steam last year.

“Most of the correction [will] be seen in the first half of this year and then [home price will] stay flat in the second half,” said Joyce Kwock, an analyst at Nomura in a report.

But the government figures came as many experts reviewed their initially gloomy forecasts for Hong Kong’s property prices in 2019. Analysts from CLSA, Citibank and Ricacorp Properties have now predicted home prices will reach a trough in March and then rise by up to 15 per cent by December.

CLSA said the low possibility of further interest-rate increases meant Hongkongers would turn to property investment. It does not expect to see a significant increase in home supply even though there was an overall rise in the number of completed units.

“Completion is more about the delivery. The supply is more about the new starts than the completion because completion lags behind the new starts. So the completion uptake right now reflects the new flats uptake two and a half years ago,” said Alvin Huang, an analyst at CLSA. “So that should not be a concern for home prices right now.”

Ricacorp said the supply increase could be partially offset by fresh demand from new residents who no longer need to pay a 15 per cent tax on their purchase.

“There will be new demand in the market from ‘new Hongkongers’ who migrated to Hong Kong in 2012, when the buyer’s stamp duty was imposed on non-residents,” said Derek Chan, head of research at Ricacorp.

However, developers could be forced to price new projects in areas with a dense supply at a low premium to used homes nearby, said Leo Cheung, corporate development director of valuation and property management at Pruden Group.

“In some areas, such as Tai Po, Tuen Mun and Kai Tak, the high amount of new flats supply will cause pressure in sales and pricing,” Cheung said. “In the past, new projects were priced at a premium of 20 to 30 per cent to used flats nearby. This practice may not be supported by the market, given today’s sentiment.”

“