More banks are predicting declines in Hong Kong home prices, as persistent public unrest sours mood, crimps transactions

By Lam Ka-sing / | September 11, 2019 11:57 AM SGT
Hong Kong's property prices are poised to decline by 10 per cent through March 2020, as the economy shrinks this year, according to a forecast by Morgan Stanley, the first bank to predict a contraction as protests across the city extend into their 12th week.
The "key drags" on the economy include "continued trade tension, disruption to economic activity due to unrest, as well as a potentially higher Hibor, which are likely to lead to broad-based slowdown in consumption, investment and trade in the second half of the year," Morgan Stanley's economist Jenny Zheng said in a report.
Morgan Stanley joins a chorus of banks, including DBS and Bank of America-Merrill Lynch, that are now predicting home prices in the world's most expensive property market to decline fromtheir June peak through to the first quarter of next year. In the worst of three scenarios outlined by DBS, prices could plunge by between 20per cent and 30 per cent next year.
Hong Kong's property bull run, which had just regained its pace in the first half after a five-month correction, began to stumble again in June, after an estimated 1 million people marched on the streets on June 9 against an unpopular extradition bill, unleashing waves of rallies, work strikes, sit-ins and public unrest. Over the past fortnight, protesters have clashed with police and forced Hong Kong's airport to halt hundreds of flights over two days.
"We see no increase in residential prices for 2020 for now," said Karl Choi, Greater China property analyst at Bank of America-Merrill Lynch, who also expects cheaper office and commercial rents amid declining retail sales. "Previously we were looking for a 5 per cent increase in prices this year. Now our new forecast calls for a 2 per cent drop [overall] this year, down 10 per cent from the peak in June."
The slowdown is already being felt, as shrinking transactions force some panicking owners to sell their homes for a loss. A flat measuring 848 sq ft at Harbour Heights in North Point, the scene of violent clashes between protesters...