Hong Kong's ever-climbing property prices have long made the city a global posterchild for unaffordable housing, but there are signs change may be afoot, if buyers would just believe it.
Hong Kong's property prices have more than doubled since 2009, consistently ranking the city among the world's most expensive property markets. But now, property prices are "quite vulnerable. It's going up only because of a general consensus that it will go up," Nicole Wong, an analyst at CLSA, said recently.
"In general, we are no longer in times of extremely tight supply," she added, noting that the number of units under construction has risen sharply since 2011.
She estimates 15,000 to 18,000 saleable units will be completed over the next couple years, a 40 percent increase on 2013-15. Wong expects developers' pricing power will take a hit, especially as the primary -- or new development -- market's premium over the secondary, or resale, market has shrunk from around 40 percent to 5 percent.
Developers have stepped up incentives to buyers, a September Deutsche Bank report noted, adding that secondary transactions were seeing lower average selling prices, sometimes at below-market levels.
That's likely to be just the sort of news the city's chief executive, CY Leung, wants to hear.
In March, he told the Credit Suisse Asian Investors Conference in Hong Kong: "We need to break the backbone of the housing problem," and cited plans to add 480,000 units over the next 10 years. The city is planning to target developments in outlying areas, such as Kowloon East and East Lantau, as well as land reclamation projects between Hong Kong and Lantau islands.
The cost of housing in the special administrative region of China has been a source of deep discontent even before Britain handed over the city to the mainland in 1997.
The government, sensing creeping public outrage, resorted to draconian measures a couple years ago, including doubling the stamp duty, or property transaction tax, on many buyers, mainly non-permanent residents, to cool the market. It also raised down payment requirements, in some cases to 60 percent of the sales price.
"For many years, Hong Kong had a housing demand-supply imbalance," Paul Louie, a property analyst at Barclays, said recently. "Since [Leung's] term began, we've seen the government be proactive in increasing land and housing supply in the market."
Louie believes that based on the numbers, the supply-demand situation has reached equilibrium.
"In the minds of homebuyers, they still think there's a shortage, but the numbers point to a different scenario," he said. "Homebuyer psychology takes longer to reverse."
Some expect a quick decline in prices. In a September 30 note, UBS forecast Hong Kong property prices would fall about 25-30 percent by the end of 2017, although that follows a 340 percent rise since 2003.
"This round of price reversals will be triggered by a deteriorating local economy," Eva Lee, head of Hong Kong and China property research at UBS, said in emailed comments. "Price drops may come more gradually and over multiple years."
One factor that may weigh is the currency, she said. Hong Kong's dollar is pegged to the U.S. dollar, meaning its currency is strengthening even as most of its regional counterparts are tanking, making the special administrative region's property more expensive for many potential buyers.
With the U.S. Federal Reserve widely expected to hike interest rates by the end of this year, that's also likely to push up mortgage rates in Hong Kong, because the dollar peg means that monetary policy in the two countries is also linked.
To be sure, Hong Kong's prices don't show any signs of weakening just yet. The territory's price index for July, the latest available, rose to 303.6, posting increases for 16 out of the previous 17 months.
Some don't expect Hong Kong's property will ever be anything but pricey.
Any price declines "might be just a short-lived respite as prices zigzag upwards," said Alexander Karolik Shlaen, an economist and CEO of Panache Management, a luxury brands and real estate investment advisor.
He sees Hong Kong as a "super-tier" Chinese city. "Hong Kong is the most desired city for Chinese people," he said, noting the mainland's propensity for turning out millionaires and billionaires. "If just a few percent move to Hong Kong, it will drive the market for years to come."
There's some sign Chinese developers agree. In late September mainland-based Shimao Property beat local developers in a government land auction for a site in Kowloon Tong, the South China Morning Post reported. Shimao plans a luxury development on the site, the report said.