[I-bank focus]Home prices seen to drop 30%-plus by end-2015

    Barclays Research is cautious on the outlook for HK home prices. Its expectation is for home prices to drop by more than 30% by end-2015.
  So far this year, the Centa-City Leading Index (CCL) home price index has risen by 10.5%. The research house sees some important similarities in the supply-demand arguments that have driven the recent fall in oil prices and its call for home prices to correct.
  It noted that, over the past two years, two asset classes have taken a step function down. Gold prices fell 29% between January and June 2013. Brent has fallen 48% between June 2014 and now.
  While property and oil may seem different, Barclays believes many of the explanations behind the recent fall in oil prices can be similarly applied towards property, namely excess supply and reduced demand, can be similarly applied to the Hong Kong housing market.
  Although developers have sold 14,857 units through 11 months of 2014, the pace of supply creation has been even faster (19,443 units). While home buyers continue to focus on the near-term supply constraint, at some point this supply will come, it said.
  Looking at the trough-to-peak moves since the 2008 credit crisis, Barclays said that the gold price rose by 167% from US$712/oz to US$1,900/oz. Brent rose 272% from US$34/barrel to US$126.7/barrel.
  By comparison, HK home prices have risen by 132% (CCL up from 56.78 to 131.61). Some may argue that HK property is different - i.e. interest rates remain low, supply is constrained and demand is high - but the research house said many of the same arguments also held for oil and gold previously.