Hong Kong home prices could begin falling next year, says JP Morgan

Hong Kong home prices could fall by 5 per cent to 10 per cent over the next three years, according to JP Morgan, which warned of the risks of an economic slowdown in the city.

A slowdown marked by falling retail sales and a softening mainland economy would adversely affect home purchasing power and buying desire, said  Cusson Leung, head of conglomerates and property research at JP Morgan.

Leung told a press briefing on Friday there were a number of factors that could affect the performance of Hong Kong property market, such as credit leverage and capital flow, while adding that he did not see any immediate risk of over-leveraging of real estate or capital outflow.

The unemployment rate is expected to rise

However, he raised concerns over a potential slowdown of the city’s economy, linked to the risk of further decline in the mainland China economy.

“Retail sales are declining and international brands are talking about network consolidation in Hong Kong,” he said. “The unemployment rate is expected to rise.”

Leung said the impact of the negative factors would become more obvious early next year. “2016 will be a more difficult year when compared with 2015. Home prices could see a decline,” he said.

While saying that JP Morgan had not yet reached a house view on the degree of home price falls, he said it was possible prices could drop by 5 per cent to 10 per cent a year over the next three years, starting from next year.

Hong Kong home prices rose 13.5 per cent last year and 8 per cent in the first half of this year, according to the data from the Rating and Valuation Department.