Home prices in Hong Kong, one of the world's most expensive property markets, could see double-digit declines next year, forecasts from major banks show.
Prices are expected to drop 15 percent in 2015 on the back of an increase in unemployment, "a rising interest rate environment [in the U.S.] and competitive pricing by developers," Credit Suisse said in a report this week.
The bank expects the Federal Reserve to increase borrowing costs by a quarter-point in the second quarter of next year followed by another half point in the second half, boosting mortgage rates in Hong Kong, which effectively imports interest rate policy from the U.S. through its currency peg. This could dissuade buyers from the property market.
Meanwhile, Deutsche Bank anticipates a 20 percent price decline next year on expectations of higher U.S. rates.
The property sector has defied a string of measures aimed at cooling runaway prices, including a flip tax on properties resold within six months and a doubling of the stamp duty. The latter measure was relaxed earlier this year. Average prices surged to all-time highs in October, data from local real estate agency Centaline show.
Other factors supporting price falls
Increased land supply next year should also see prices move off record highs as abundant supply typically leads to competitive pricing among developers, Credit Suisse said.