Visi MoneyAccording to a forecast from Citigroup, Hong Kong’s home prices are expected to drop another 10% in 2024. This is due to a combination of factors including a looming supply glut, high interest rates, and a slow impact of expected interest-rate cuts. The US Federal Reserve is expected to start cutting interest rates in July and reduce them by 1% this year, but it will take time for these cuts to have an impact on the Hong Kong economy. Citigroup remains conservative on the residential market outlook, as mortgage rates will remain high, making it difficult for potential buyers to afford homes.
In addition to high interest rates, there is expected to be a high supply of new flats in the coming years. Citigroup predicts that an average of 20,000 units will be completed in the next two years, compared to 10,000 units in 2022 and 9,000 units in the first nine months of 2023. This excessive supply of new flats has led developers to curtail future private housing supply, which is expected to contract by 44% from 2026 to 2028 compared to the previous three-year period. The decrease in homebuyer interest, combined with high interest rates, has had a tangible effect on property development in Hong Kong.
To bring the housing supply mechanism back on track, more demand-side supportive measures will be necessary. The number of mortgages and mortgage approvals for completed units has been declining, setting new records lows. However, as interest rates are expected to start falling in the second half of the year and the economy gradually recovers, the number of loans may stabilize and buyer confidence may increase.
In terms of investment sentiment, Citigroup remains neutral on allocation in the mainland China and Hong Kong stock markets. The stock market is affected by uncertainties such as China’s economic policies and geopolitical tensions. However, if the macroeconomic environment improves and geopolitical tensions ease, overseas capital may shift back to China from other countries such as the United States and India.
In summary, the key points from the article are:
- Hong Kong’s home prices are expected to drop another 10% in 2024
- High interest rates and a slow impact of expected interest-rate cuts are suppressing investment sentiment
- Supply of new flats will be high, which may lead developers to curtail future housing supply
- More demand-side supportive measures will be necessary to bring the housing supply mechanism back on track
- Number of mortgages and mortgage approvals for completed units have been declining
- Citigroup remains neutral on allocation in the mainland China and Hong Kong stock markets
