Hong Kong home prices could slump 20% by 2025, Goldman says

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(March 30): Hong Kong’s home prices will decline about 20% during the next four years as a worsening economy and rising interest rates hit demand, according to analysts at Goldman Sachs Group Inc.

Residential property values will drop by 5% every year from 2022 to 2025, analysts including Gurpreet Singh Sahi said in a March 28 report. The investment bank previously predicted prices would remain flat this year then decline 5% in 2023 and 2024 before stabilizing the following year.

Hong Kong’s battle with a fifth wave of Covid-19 infections is hitting the financial hub and will contribute to a shrinking economy in the first quarter, Goldman economists said. The government has ordered businesses including gyms and cinemas to shut and restricted gatherings in the past couple of months. Some measures are set to loosened in late April if the pandemic situation continues to improve.

The social distancing rules will combine with rising unemployment and higher borrowing costs to dampen demand, which will be reflected in lower home prices, according to the bank. Goldman expects mortgage rates to more than double and be close to 4% in 2024 from about 1.5% currently.

The city’s home prices have been falling steadily in the past few months, according to Centaline Property Agency Ltd. Prices are down more than 3% since the beginning of the year, and are at the lowest in 12 months.