World
Morgan Stanley Revises Outlook for Hong Kong Property Market as Challenges Persist
Oct
In the dynamic Hong Kong Property Market, Morgan Stanley, a leading financial institution, is reevaluating its residential property forecast in light of ongoing challenges. While initially optimistic about a potential rebound in property values, the bank has since adopted a more cautious perspective.
2023: Projected 3% Price Decline
In their most recent research note, analysts Praveen Choudhary and Jeffrey Mak reveal that Morgan Stanley now expects a 3% decrease in home prices for 2023. This stands in stark contrast to their initial projection of an 8% increase. This adjustment follows a significant 16% decline experienced in 2022.
Hong Kong Property Market Faces Challenges in 2024
Looking ahead to 2024, Morgan Stanley envisions another gloomy year for Hong Kong’s property market, with average selling prices expected to drop by 5% to 10%. Several factors contribute to this revised projection. These factors include stretched affordability, an increase in land supply, negative rental carry, and weakening market sentiment. These developments have been influenced by a prolonged stock market decline.
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Worries of Mortgage Loan Imbalance
Growing concern exists that property prices will continue to decline in the following year. This may lead to a proportion of Hong Kong mortgage loans exceeding the property’s value, possibly reaching its highest level since 2005. This situation is raising concerns for homeowners.
Interest Rate Hike Takes Toll on Local Housing Market
Escalating interest rates are squeezing the housing market, and used-property values have already plummeted by 18% since 2021. According to data from Centaline Property Agency Ltd., this decline is significant.
Morgan Stanley’s Shifting Perspective
Morgan Stanley’s viewpoint on the Hong Kong real estate sector has transitioned from “attractive” to “in-line.” This shift is influenced by the sector’s challenges, stemming from increasing US interest rates and China’s slowing growth. Consequently, the bank has revised down its price targets for local property developers, with an average reduction of 19%.
Ratings and Preferences
The US bank has downgraded Wharf Holdings Ltd.’s rating due to a tough operating outlook in its major business segments. On the other hand, it expresses a more favorable outlook for CK Asset Holdings Ltd., Sun Hung Kai Properties Ltd., and Sino Land Co. within the evolving landscape of Hong Kong’s property market.