Citigroup: Hong Kong property prices expected to fall by more than 10% this year, with the bottom of the cycle possibly appearing in 2025.

On January 2nd, Citibank's Director of Investment Strategy and Global Wealth Planning, Liao Jiahao, stated that it is expected that Hong Kong residential prices will continue to decline in 2024, with a potential drop of over 10% by the end of 2024. The bottom of the cycle is expected to appear in 2025, depending on interest rate trends and the macroeconomic environment in China. Due to oversupply and weak demand, office rental prices may further decline by single digits. Liao Jiahao also mentioned that the trend of retail store rental prices is influenced by the exchange rate of the RMB. The weakening of the RMB affects the recovery of retail sales for mainland Chinese tourists. It is expected that retail rental prices in shopping areas will remain relatively stable, but rental adjustments in other areas may be more significant. Regarding the interest rate cuts in the United States, he pointed out that the bank expects US interest rates to have peaked in the third quarter of last year. The first interest rate cut is expected to take place in July 2024, with a reduction of 0.25% each time. The bank predicts a total interest rate reduction of 1% for the year. Liao Jiahao expects that if the US cuts interest rates this year, the impact on the Hong Kong economy and property market will not be immediate. In particular, banks will adjust their preferential interest rates in response to property market risks. If Hong Kong banks maintain a cautious stance, they may maintain higher interest rates to hedge risks. It is estimated that a US interest rate cut will not significantly change the preferential interest rates, and it is believed that the supply-side interest rates need to fall to around 3% in order to stabilize property prices.