DBS: The benefits of interest rate cuts are offset by high inventory levels, and Hong Kong property prices are expected to remain flat until 2026
DBS Bank expects Hong Kong property prices to remain flat until 2026 due to insufficient overall economic growth momentum. Although the Federal Reserve's interest rate cuts may stimulate trading, high inventory and an increase in residential supply of about 14% over the next two years will put pressure on the market. The economic outlook remains gloomy, the retail sector faces challenges, and geopolitical tensions exacerbate complexities. It is expected that the Hong Kong dollar interbank offered rate will drop to 2.88-3.38% in the first half of next year, and bank loans will turn to positive growth
According to the Zhitong Finance APP, Zhou Hongli, a senior economist at DBS Bank (Hong Kong) Economic Research Department, expects Hong Kong property prices to remain flat from next year until 2026 due to ongoing pressure in the overall property market. The Federal Reserve's interest rate cuts may help trading activity, but current inventory is at a 20-year high, and it is expected that overall residential supply will increase by about 14% over the next two years. Developers are pricing more aggressively, and there is a lot of uncertainty overall, with prices expected to fluctuate next year. The property market needs to wait for the overall economic growth momentum to see real growth, which is expected to take 1 to 2 years.
Zhou Hongli pointed out that the economic outlook for Hong Kong remains bleak. Although lower interest rates may stimulate loans and strong external demand may drive growth in related product exports, the retail sector continues to face issues of weak employment and changing consumer preferences, while the real estate market is still under pressure from oversupply, and ongoing geopolitical tensions have complicated the situation .
He noted that the 3-month Hong Kong dollar HIBOR is expected to drop to 2.88-3.38% in the first half of next year, and the accommodative monetary environment should alleviate liquidity pressure on local businesses. It is expected that by mid-next year, bank loans will record positive growth, with moderate growth for the whole year.
Additionally, he anticipates that the U.S. federal funds rate will drop to 3.5% by the end of next year, and it is estimated that the Federal Reserve will continue to cut rates next month.
Lin Fengjun, an economist at DBS Bank (Hong Kong) Economic Research Department, stated that although positive news in residential investment may stabilize prices, the oversupply of new housing indicates that a comprehensive recovery is still far off