On January 13, Hong Kong real estate stocks collectively came under pressure. As of press time, Henderson Land (00012) fell 2.69% to 21.7 HKD; Link Real Estate Investment Trust (00823) fell 2.18% to 31.4 HKD; Sun Hung Kai Properties (00016) dropped 1.9% to 69.85 HKD; Hang Lung Properties (00101) decreased by 1.66%, to 5.91 HKD.
Nonfarm Data Strengthens Fed's Hawkish Stance
The primary reason for the real estate stocks coming under pressure is the U.S. December nonfarm employment data significantly exceeding market expectations, adding 256,000 jobs compared to the expected 160,000. This data has strengthened the market's expectation of further tightening of the Federal Reserve's monetary policy. Bank of America stated that the strong employment data might set the tone for the Fed to pause rate cuts in January, while reinforcing the hawkish stance expressed at the December FOMC meeting.
Concerns over a second wave of inflation in the U.S. are rising. With the ongoing strength in U.S. economic data, high interest rates may persist longer, exerting dual pressure on the real estate market's funding costs and consumer demand.
Citi and UBS's Outlook on the Hong Kong Property Market
In this context, Citi's latest research report has become more pessimistic about the Hong Kong real estate market. Citi expects that by 2025, Hong Kong home prices will fall by 3%, primarily due to a historically high supply and a prolonged high interest rate environment, which might prompt developers to accelerate price cuts to clear inventory.
UBS has revised its forecast for this year's Hong Kong home prices from a 0%-5% increase to remaining flat. UBS noted that, after the U.S. elections, the Fed's rate cuts might be less frequent and smaller than previously anticipated, which could have a certain negative impact on the Hong Kong real estate market.
Market Outlook and Impact
The sustained high interest rate environment and surplus supply exert significant pressure on Hong Kong real estate stocks and the property market. Analysts believe that in 2025, Hong Kong developers might accelerate the introduction of discounts and promotional activities to cope with inventory pressure. Future real estate market performance requires close attention to the directions of U.S. monetary policy and the specific progress of the local economic recovery.
As uncertainty over Fed policy persists, investors may remain cautious about real estate stocks in the short term, while the broader Hong Kong property market will face a dual challenge from high funding costs and weak demand.
