A combination of slowing demand from mainland Chinese buyers, higher interest rates and tight property restrictions could present a perfect storm for Hong Kong's real estate market, according to an economist at HSBC.
Housing prices in the Asian financial capital, which have skyrocketed in recent years, could correct 10-20 percent as a result, said Frederic Neumann, Co-head of Asian Economics at the bank.
"I think the [cooling] measures that we've seen imposed certainly put a dampener on the market. But if you look ahead there are also other headwinds coming in, a China slowdown is certainly going to weigh on property prices," Neumann told CNBC Asia's "Squawk Box" on Monday.
"And we have higher U.S. dollar interest rates [which] directly feed into Hong Kong as well," he added. Hong Kong's monetary policy mirrors that of the U.S. given its currency peg to the greenback.
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If transaction volumes, which have fallen sharply in the recent months, continue to remain under pressure, property prices could follow suit, Neumann said. Residential transaction volumes totaled 4,276 units in May, down 49 percent from 8,349 in the year ago period, according to Hong Kong's Land Registry.
"Usually prices follow transactions, so if transactions remained as depressed as they have been, a 10 to 20 percent correction in some segments of the market cannot be ruled out, especially in the top end of the market," he said, noting that this decline would take place over the next one to two years.