Deutsche Bank foresees 20% drop in Hong Kong property prices

Hong Kong’s property market is normalizing and should see welcome reductions in high property prices.

Deutsche Bank AG believes property prices might plunge by as much as 20% in the next 12 months as the housing supply situation normalizes.

“The supporting pillars for the residential market over the past two years are weakening . . . and we expect the Hong Kong property market to enter a new age, characterized by normalized supply dynamics,” said Deutsche Bank.

Incoming Chief Executive Leung Chun-ying has promised to tame high prices that have made homes increasingly unaffordable for the general public.

Hong Kong home prices increased about 8% this year. Since 2009, property prices have jumped more than 80%. This massive increase has been fuelled by record-low mortgage rates, a lack of new property on which to build h omes and an influx of buyers from mainland China.

As a result, Hong Kong now the world’s most expensive place to buy a home and to rent office space.

The Hong Kong government has said it may take further action including accelerating new land supply and tightening mortgage lending if home prices continue surging.