Hong Kong’s property prices are likely to rise at a much slower pace, or may even trend lower, this year amid a potential plateau in demand and expected rise in interest rates, according to analysts.
Fitch Ratings says property prices in the city may peak out soon as demand now is driven more by investment rather than real consumption, the Hong Kong Economic Journal reported Friday.
“Home prices are forecast to be to be flat this year versus a 10 percent increase in 2014, and an average gain of 15 percent over the previous decade,” Fitch was quoted as saying.
The ratings agency maintains that Hong Kong property market risks a downturn, given the combination of stretched affordability, rising rates and large speculative investments.
The real mortgage rate is seen increasing to 2.5 percent this year and 2.75 percent next year.
BNP Paribas, meanwhile, believes the city’s home prices may rise at most 5 percent this year amid tighter liquidity conditions.
Sentiment in luxury housing sector is expected to be lackluster due to the halt of the Capital Investment Entrant Scheme, the investment bank said.
Frederic Neumann, co-head of Asian Economic Research at HSBC Holdings (00005.HK), also sees pressure from potential rate hikes in the United States. Interest rates in Hong Kong tend to follow those in the US due to the local currency’s peg to the greenback.
Given a huge accumulative growth in property prices over the past few years, the Hong Kong market is likely to be flat this year, Neumann said.
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