Amid unhappiness over Hong Kong’s unaffordable housing, Nomura has predicted a drop of 10 percent in the country’s home prices.
Nomura Holdings expects home prices in Hong Kong to fall a further 10 percent as a pipeline of new developments is met by looming interest rate hikes and stalling income growth, reported Bloomberg.
“We are bearish on the physical property market, on a weakening economy, deteriorating affordability, declining retail sales and stagnant real household income growth,” wrote analysts led by Jeffrey Gao in a note. The analysts revealed, without being more specific, that prices will drop over in medium term.
Earlier this month, Gao had said that the rebound in property prices in Q2 was a mere pause in a multi-year correction. Data from Centaline Property Agency Ltd showed that Hong Kong home prices fell by as much as 12.8 percent as at end-March, 9.4 percent below their September peak.
Mortgage rates there, which are linked to the Federal Reserve rate through the pegged currency, are also expected to increase following last week’s statement by Fed Chair Janet Yellen, that the case for a US interest rate hike is getting stronger.
Despite the negative outlook, Nomura is still positive on Hong Kong property firms overall, citing solid balance sheets, potential for share buybacks, and healthy debt levels.
Its top picks are Kerry Properties Ltd and Sun Hung Kai Properties Ltd, the shares of which increased by 6.9 percent and 17 percent respectively this year.
Cheryl Marie Tay, Senior Journalist at PropertyGuru, edited this story. To contact her about this or other stories, email cheryl@propertyguru.com.sg
