Hong Kong home prices to fall by 30% by 2023 end: Goldman Sachs

Hong Kong’s home prices are expected to decline 30 per cent by the end of 2023 from last year’s levels, Goldman Sachs Group Inc. has said. The American investment bank revised its forecast downwards amd now expects prices to fall by 15 per cent in both 2022 and 2023, compared with year-end 2021 levels. It sees no change in 2024. It had earlier predicted that prices would fall by a total of 20 per cent through 2024.

Hong Kong’s interbank rates, known as Hibor, has seen an unexpected rise. Three-month Hibor, the interest rate banks charge each other for borrowing money, has surged this year to the highest since 2008. More than 90 per cent of Hong Kong’s mortgages are tied to Hibor.

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“This view change is due to a faster-than-expected rise in and higher medium-term level of Hibor, and hence mortgage rates,” the bank said in a report, referring to the Hong Kong interbank offered rate. “This would continue to pressure affordability, (and) keep investors away from the market unless macro or policy becomes more supportive.”

The decisions made by the US Federal Reserve have an impact on the Hong Kong market and another hike in rates is expected next month as well.

Rising rates, an exodus of residents and a slowing economy are all contributing to the change. Residential prices have already dropped eight per cent this year, Goldman said.

Higher rates “would continue to pressure affordability, keep investors away from the market unless macro or policy becomes more supportive,” the Goldman analysts said.

(With inputs from agencies)