The prices of homes in Hong Kong fell by 2.4 per cent in December, wiping out virtually all the year’s gains, according to government data released on Thursday. Although the drop was lower than the 3.2 per cent slide seen a month earlier, it brought the home prices index published by the city’s Rating and Valuation Department back to 358.4, just 1.6 per cent higher than its level a year ago. Last month’s decline means house prices have slipped 9.2 per cent since they reached a peak in July. Prices of flats measuring between 431 and 752 square feet dropped the most in December, sliding by 2.8 per cent, with those in New Territories costing only HK$11,580 (US$1,476) per square foot on average. A flat at the lower end of that scale changed hands for an average of HK$4.99 million. The smaller drop in December may be the result of increased turnover for both new and used flats and the slowing pace of interest rate rises, said Derek Chan, head of research at Ricacorp Properties. He said the fall was in line with expectation and would narrow further up until March. “The accumulated drop in the previous three months is already large,” said Chan. “So in December, as new projects saw a great response, sentiment was driven higher. The previously pent-up purchasing power came back to the market, heating up sentiment again, which made the drop slower.” Chan said home prices could go down by a further 3 to 5 per cent from January to March. JP Morgan goes bullish on Hong Kong home prices, expecting gains of up to 7 per cent this year Shih Wing-ching, chairman of Hong Kong-based Centaline Property Agency, said home prices will first rise by 5 per cent to 6 per cent, and then drop by about 10 per cent. “The price at year-end will be lower than that in the beginning of the year. “Unless the US reduces interest rates, the home market will not be booming,” he added. The US Federal Reserve kept interest rates unchanged overnight at 2.25 per cent to 2.5 per cent, in line with market expectations. And the interest rate future shows there is a zero per cent chance of an interest-rate increase in March, when the Fed next discusses interest rate increases. The drop in home prices comes after CLSA, Citibank and JPMorgan – in stark contrast with Centaline’s Shih – recently said these prices will rise by up to 15 per cent from April to December. These financial institutions correctly forecast the current 15 per cent correction in the market. The correction began in August 2018 after a 28-month rally. Hong Kong, meanwhile, remains the least affordable city in the world to own a flat in. First commercial plot on Kai Tak runway fails to take off as Hong Kong rejects all nine bids for site Shih also said the withdrawal of the tender for the first commercial plot on the runway of Hong Kong’s old airport at Kai Tak stemmed from a “lack of coordination between senior government officials and frontline officials”. “The government wants home prices to drop, but did not take the initiative to lead on this,” he said. “The Lands Department upheld the high land price policy, in contrast with the idea of cooling home prices.” Shih said frontline government staff should communicate with senior officials and not keep land prices so high, and added that it was normal to see developers offer low prices amid the ongoing US-China trade war. Elsewhere, buyers have walked away and forfeited deposits for 36 homes, a 16-month high, in another sign that they expected prices to fall.