Hong Kong home prices could fall 45pc: Midland-controlled agent
HK Property forecasts that taxes, higher interest rates may spark a major plunge in the market
Home prices could fall as much as 45 per cent over the next three to five years amid higher property taxes, rising interest rates and a bleak outlook for commercial property, says one real estate agent.
Hong Kong Property, controlled by Midland Holdings, the city's only listed real estate agent, made the bearish forecast yesterday.
"The property market has been severely hurt with sales volumes declining sharply after the introduction of the extra stamp duties," said Jeffrey Ng Chong-yip, senior executive director at Hong Kong Property.
The city will enter an era of higher interest rates once the US Federal Reserve's curbs its stimulus, Ng added.
Over the past 23 years, Hong Kong's mortgage rate has averaged 6.2 per cent, with an affordability ratio of 45.7 per cent. The measure is the ratio of mortgage instalment payments to household income.
If mortgage rates increase from their current 2.3 per cent to 6 per cent, Ng said home prices would have to drop 27 per cent in order to maintain an affordability ratio of 45.7 per cent.
With the government stepping up measures to cool the market, Ng said average monthly transactions in the secondary market could drop to 4,500, a level close to that during Sars in 2003.
