This should also bode well for the share prices of Hong Kong-focused developers, he added.

There is a 77 per cent chance the Fed is likely to implement its first rate cut in March, next year, said Cheng. Currently, the market expects a 75 basis points rate cut in 2024.

Hong Kong luxury home prices to rise as Singapore’s fall next year: Knight Frank

The expected Fed rate cut may not be fully realised, according to Chau Kwong-wing, the director of the Ronald Coase Centre for Property Rights Research at the University of Hong Kong. There is a possibility the Fed may hike rates again if inflation rears its head again, he said.

“Inflation in the US is a structural [issue], the main cause being decoupling with China,” Chau said. “The decoupling process will take a long time and therefore inflation and interest rates will remain high for the next couple of years, although there may be short-term fluctuations.”

As a result Hong Kong’s property prices are unlikely to rise next year, he added.

Property prices in Hong Kong, among the most expensive in the world, have dropped by almost 20 per cent from their historical peak in 2021, according to data compiled by the Rating and Valuation department.

Despite the possibility of US interest rate cuts next year, Hong Kong’s prime rate is still more likely to move sideways for a period of time, and may not be able to follow US rate cuts immediately, said Wong Mei-fung, managing director of Centaline Mortgage Broker.

Hong Kong home prices may fall more, rebound hinged on US interest rate cuts

Even the HKMA cautioned the public on the interest-rate risks, saying the high interest rate environment may last for some time. “The public should carefully assess and manage the relevant risks when making property purchases, mortgages or other borrowing decisions,” the de facto central bank said.

Joseph Tsang, chairman of JLL Hong Kong echoed Wong’s sentiment, saying Hong Kong banks will delay lowering their prime rates.

“Cutting interest rates doesn’t mean the market is going to rebound, we saw that in 1997,” Tsang said, adding that JLL will not change its forecast on property price declines next year.

JLL also expects a slump of up to 10 per cent next year, while Knight Frank and Cushman & Wakefield have each forecast a drop of up to 5 per cent in home prices in the first half of 2024.

Still, property agencies remain optimistic.

Midland Realty and Hong Kong Properties expect a rebound of up to 5 per cent, while Ricacorp Properties sees a potential upside of 8 per cent next year.

Primary transactions will account for 30 per cent of the overall transactions next year, according to Martin Wong, Knight Frank’s Greater China head of research and consultancy.

He expects developers will offer greater discounts on new homes, which will exert further pressure on the secondary market.

A survey released by Citi Hong Kong last week found that the number of Hongkongers who say it is a “good time” to buy a house fell three percentage points from a year ago, but it was the second most optimistic result recorded in the past 11 years.