Salient to Investors:

Deutsche Bank said Hong Kong prices could fall as much as 20 percent over the next 2 years after lenders raised home loan rates.

Buggle Lau at Midland Holdings said the pile of measures plus higher interest rates will be a big challenge for the market – as many as a third of real estate agent branches in Hong Kong will close.

Tony Tsang and Jason Ching at Deutsche Bank said the new government measures, potential further rises in mortgage rates, and the expected increases in new supply in the medium term will bring larger corrections to property prices.

Miller Samuel and Douglas Elliman Real Estate said a Hong Kong apartment costing $970,000 would be $700,264 in Manhattan.

Savills said Hong Kong has the highest housing costs among major global cities, including London, New York, Paris and Tokyo.

Demographia said Hong Kong homes cost an average of 13.5 times the gross median household income versus 12.6 times a year ago, the most expensive housing market.

Dominic Chan at BNP Paribas said lenders may increase mortgage rates in 2013 by 50 basis points to neutralize the impact of the risk floor – larger banks increasing followed by smaller ones but not by too much that would cause home prices to fall, which isn’t good for them.

Venant Chiang and Christie Ju at Jefferies, who in August predicted a decline in home prices of as much as 10 percent in 2013,  said the change in the monetary environment remains their key concern for the overall Hong Kong asset market outlook.

Jefferies said the affordability ratio for Hong Kong homes of 40 square meters to 70 square meters – half of total private housing – is 49 percent. Jefferies said prices will have to decline 15 percent if mortgage rates rise by 1 percent to maintain the same level of affordability.

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