Weakening Sentiment May Be Set to Hit Hong Kong Home Prices

(Bloomberg) -- Weakening sentiment means Hong Kong home prices are set to decline over the next three months and then stagnate, according to the Royal Institute of Chartered Surveyors, which cited a survey of professionals in the field.

Buyer demand fell in August for the first time in two years, the institute said, echoing comments from Financial Secretary Paul Chan, who said the market is cooling as borrowers brace for an increase in the prime rate, which may come as early as this week.

But the survey pointed to only a modest 0.2 percent decline over the next year, including a 0.9 percent fall on Hong Kong Island. That compares with a host of more pessimistic forecasts, including Nomura Holdings Inc. predicting a 13 percent slump next year after a bull run over most of the past 15 years.

“Chartered surveyors in Hong Kong indicated a fairly dramatic shift in sentiment surrounding the housing market in Hong Kong in August,” Sean Ellison, the institute’s senior economist for Asia-Pacific, said in a statement. “Given the broad-based nature of this pullback, as well as the presence of several factors -- trade wars, higher borrowing costs, dear valuations -- rather than a single catalyst, these results may not point to a transitory phenomenon.”

Surging interbank rates and the biggest jump in the Hong Kong dollar in 15 years at the end of last week point to rapidly changing conditions for the world’s least affordable property market.

The volume and value of used-home transactions are forecast by Centaline Property Agency to drop by 32 percent and 38 percent respectively this month from August. Sales volumes are set to be the lowest since March 2016, according to Centaline.

Vanke Property Overseas Ltd. is selling apartments at its project Le Point in Tuen Mun for as little as HK$9,878 ($1,265) per square foot, the lowest price in the primary home market in about two years, according to local media reports. Vanke’s rivals have offered free holiday packages and flexible financing to entice buyers.

The surveyors’ institute didn’t say how big any estimated price decline would be over the next three months.

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