Ongoing stock market uncertainty and rising US interest rates will further reduce investor demand for Hong Kong real estate this year.

Summary:

• The value of prime real estate in Hong Kong will fall by 15% in 2016
• Market volatility and the rise of US interest rates will dampen investor sentiment throughout the rest of the year
• Hong Kong’s property sector is currently experiencing its lowest sale volumes for a quarter of a century

It’s already been a tough start to the year for Hong Kong’s property market, but it would appear to be just a sign of things to come.

The price of prime residential real estate is anticipated to fall 15% by the end of 2016, according to the latest briefing report from Savills World Research. December’s rise by the US Federal Reserve in its base rate of interest, coupled with the continued volatility of Asia’s biggest stock markets, has quashed investor appetite for luxury property in the city and naturally impacted on the market’s performance.

The report outlines: “With investment sentiment dwindling, and few market highlights, many purchasers held off making investment decisions. This, coupled with the increasing number of newly completed luxury units being made available for lease amid declining rents, caused some potential purchasers to switch to the leasing market to avoid uncertainties over the next one to two years.”

Earlier this month new sales data showed that Hong Kong is currently experiencing its slowest transactional period for 25 years, with sales in February plummeting by 70% compared with the same period 12 months previous.

Instead many of the region’s investors have turned to those overseas property markets that can deliver the high returns and stability they are currently seeking. Huge imbalances in the levels of supply and demand are currently driving huge capital growth for property investors in the UK, with households and investors in every British region reporting rises in the value of their assets in March.