Hong Kong's housing market facing a slump in 2015

Anyone looking for blue skies and sunshine in Hong Kong's property market could be disappointed. It's hard to find an analyst who can put a positive spin on prospects for next year, with predictions of price dips of at least 5 per cent in 2015. Some, such as Barclays property specialist Paul Louie, have forecast a plunge of as much as 30 per cent.

After four years of steady increases which have now slowed, analysts see a severe correction looming, as the combination of a surge in new supply, the effects of government-imposed cooling measures and next year's inevitable interest rate hike combine in a "perfect storm", according to Louie.

Hong Kong brokerage CLSA is slightly less pessimistic, expecting property prices to slump 15 per cent by the end of next year as the government's market-cooling measures bite.

"Prices will correct a little more if interest rates are raised and the economy weakens," Nicole Wong, CLSA's regional head of property research, says of the group's recent report on the Hong Kong and mainland property markets.

CLSA says Hong Kong property prices were already 3 per cent off their February peak. The brokerage had been expecting a 10 per cent decline by the end of next year but has now revised downwards to 15 per cent for 2015, given the increase in US Treasury bond yields and the Hong Kong government's decision to bring forward the presale of units due for completion next year.

On a positive note, Wong says property prices should not fall dramatically, even if interest rates go up and housing supply rise significantly next year.