Hong Kong’s expensive housing bubble might be about to burst
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Hong Kong’s expensive housing bubble might be about to burst

HONG KONG’S notoriously expensive housing market is set to take a dramatic tumble in the coming months, according to Moody’s Investors Service.

The credit rating and financial services agency predicts a 15 percent fall in house prices and house sales over the next 12 to 18 months.

“Emerging cases of price cuts from the secondary market of 15 to 20 percent could eventually inspire similar discounts in the primary market,” said Stephanie Lau, vice-president and senior analyst at Moody’s, at a media briefing on Wednesday, as reported by South China Morning Post.

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Moody’s is far from alone in its prediction. Investment bank CLSA echoed these concerns, also predicting a 15 percent drop in a report released in August.

Earlier in the year, both Citibank and UBS predicted similar downturns, claiming the city faces “the worst headwind in 15 years.”

Property is central to the economy of the highly developed, densely populated city and is seen as an indicator for the health of the broader economy.

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This picture taken on April 28, 2018 shows Jezz Ng sits on her bed where she rents a small living space in a co-sharing building in the Mong Kok district of Hong Kong. As housing prices spiral in Hong Kong, young professionals are living in ever-shrinking spaces, with box-like “nano-flats” and co-shares touted as fashionable solutions. Source: Isaac Lawrence/AFP

The high demand, low-interest rates, and attractive investor opportunity make Hong Kong one of the most expensive cities in the world to buy property.

But a combination of both domestic and international factors have slammed the market over the last year.

“Hong Kong’s property market is having its worst combination of fundamentals in 15 years with rising interest rates, a slowing economy and a depreciating Rmb (Renminbi),” CLSA analyst Nicole Wong said in the report.

Add to that a double-digit slide in the local stock market this year and a nine percent fall in the Chinese yuan, and you have a perfect storm for failing confidence.

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If Moody’s and others are proven right, the 15 percent drop would put the market back where it was at the start of the year.

But this will be little comfort to those young Hong Kongers hoping to get on the property ladder.

A Nielsen study found 73 percent of people believe young people hoping to buy property will need the financial assistance of their parents, needing on average US$180,000 from the bank of mum and dad.

Without this support, buying property is almost out of the question, with a quarter of Hong Kongers believing they will never be able to afford a property.