Hong Kong home prices may begin to drop in 2016: JPMorgan

Hong Kong’s property prices may correct next year after reaching a record high, as an economic slowdown in China and Hong Kong starts to weigh on real estate, according to JPMorgan Chase & Co.
Residential prices may start to fall by 5 percent to 10 percent annually starting in 2016, Cusson Leung, head of Hong Kong research, conglomerates and property for JPMorgan, said in a briefing on Friday. Prices of new homes will rise by 5 percent in 2015, as demand remains strong. Prices of existing housing will increase by 10 percent, according to Leung.
Leung said the shrinking retail market, driven by luxury brands closing stores, as well as the prospect of rising unemployment in Hong Kong will hurt property sales. Investors globally have been rattled by concern that China’s growth is slowing and that the markets may not be able to withstand an increase in U.S. interest rates.
“Pressure on the economy is the biggest concern here instead of an interest rate hike,” said Leung.
Hong Kong’s private-sector economy suffered its sharpest contraction since 2009 in August, sending a warning sign for the economic health of Asia’s financial capital.
Hong Kong reported the weakest home sales in 17 months last Wednesday, after a month-long stock rout that began in China hurt market sentiment among home-buyers and investors. It sold one-third fewer units in August than a year earlier, according to data from the government.
Centaline Property Agency Ltd., one of Hong Kong’s two largest property brokers, said its volume of contracted sales for existing apartments valued from HKD10 million (USD1.3 million) to HK$20 million plunged 50 percent last month as the Hang Seng Index stock benchmark declined. Volumes may shrink a further 20 percent in September from August, Louis Chan, chief executive officer of Centaline’s residential unit said last week. Jill Mao, Bloomberg