Hong Kong's residential property prices may remain stubbornly high for now, but one big headwind could send prices down as much as 20 percent over the next two years, Goldman Sachs said.
In a note on Thursday, the bank said it saw "tough conditions of high prices and low volumes persisting in the residential segment."
Goldman cited a number of factors contributing to the holding pattern. Firstly, government cooling measures were unlikely to be loosened any time soon. Those are likely to keep a lid on buyers' demand.
The bank said it expected interest rates to remain relatively low for a while. That's set to support prices, which would also dampen demand.
Additionally, few speculators appear likely to be forced to sell, Goldman said. That would also likely work to keep prices high and sales volumes low.
But looking ahead, the bank forecasts declines in prices through 2018, projecting a 20 percent cumulative price fall over 2016-2018, largely on expectations interest rates will rise by 150-200 basis points.
Hong Kong's dollar is pegged to the greenback, which means interest rates in the protectorate tend to track the benchmark rates set by the U.S. Federal Reserve, which has indicated it will likely increase rates twice this year. The Hong Kong Monetary Authority raised its base rate to 0.75 percent from 0.5 percent in December in the wake of the Federal Reserve's move to increase its own interest rates.