The bumper years of Hong Kong’s property market may be over.
Hong Kong is forecast to overtake Singapore as the weakest-performing luxury residential market, with prime property prices declining an estimated 5 percent this year, Bloomberg said, citing a report by Knight Frank LLP of 10 global cities that was released Tuesday.
Of the 10 cities analyzed, Hong Kong, Singapore and Paris are the three expected to see price declines this year.
“A number of new developments are due to come to the market in 2016,” according to the report. “This new supply coupled with a strengthening HK dollar will see prime prices soften.”
Hong Kong’s property market has become increasingly sluggish in recent months, prompting analysts to speculate that a 12-year rally in prices may have come to an end.
Secondary residential prices in Hong Kong dropped 6.9 percent in the fourth quarter, the biggest quarterly slump in seven years, according to data from Centaline Property Agency Ltd.
Home sales in December fell 32 percent to HK$29.8 billion (US$3.8 billion) from a year earlier, the Hong Kong Land Registry said on Tuesday.
Not everyone is bearish on Hong Kong’s property market. Morgan Stanley analysts expect prices to increase 5 percent, citing strong demographics, low unemployment and a stable mortgage rate.
But Knight Frank and other analysts cite rising interest rates in the United States and slowing growth in China as risks to the property market.
Singapore luxury home prices will slide 3.3 percent, according to the Knight Frank report. Sydney will remain the best-performing market, gaining 10 percent this year, it said.
Property adviser Colliers International Group Inc. has predicted that Hong Kong home prices may slide 15 percent this year.
Developers, who until now have been avoiding price cuts that would signal a downturn, may have to bite the bullet as more housing comes on stream.
Supply is expected to increase by 70,000 to 80,000 new units within the next three to four years, according to CBRE Group Inc.
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