HONG KONG (BLOOMBERG) – Signs of a housing market downturn in Hong Kong are spreading after the city’s first interest-rate increases in 12 years and an escalation in trade tensions between China and the US.

“We’re now in a correction like the one we had during 2015 to 2016,” said Cusson Leung, JPMorgan Chase & Co’s head of property and conglomerates research in Asia, citing buyers’ fears for the outlook of both the Hong Kong and Chinese economies.

Home prices fell 13 per cent during that downturn versus a decline of about 3 per cent so far this time around. The Hong Kong Monetary Authority needs time to assess if there’s a downward cycle that could lead to market curbs being loosened, its chief executive Norman Chan told lawmakers on Monday.

Five weeks after banks raised rates, here are several signs of a faltering market.

1. Mortgage applications plummet

Applications recorded the biggest month-on-month drop in 20 years in September, according to Centaline Mortgage Broker Ltd. The number of applications slid 56 per cent to 7,977, the Hong Kong Monetary Authority reported.

Ivy Wong, managing director at Centaline Mortgage Broker, cited banks’ readjustments of new mortgage rates in August as something that played a key role in the decline to the lowest level in 30 months.

2. Luxury sales plunge

In one well-publicised anecdote, a buyer forfeited an estimated HK$54.2 million (S$9.5 million) deposit after walking away from a deal to buy a house on the Peak. That’s only part of the picture, with September seeing the fewest luxury home transactions in data going back to 2005, according to agency Ricacorp Properties Ltd. That consisted of 36 sales out of a total of 35 developments tracked by the firm.

“A lacklustre stock market and the China-US trade war have led to a wait-and-see attitude for both investors and end-users,” said Derek Chan, Ricacorp’s head of research.

3. Agents take a holiday

Midland Realty, one of Hong Kong’s biggest property agencies, had some news for its 100 worst-performing employees last month. The bottom 10 will have to leave, the next 55 will be asked to take leave without pay for at least three months and the remaining 35 are having their performance closely monitored.

Midland, which has more than 4,000 agents in total, said while that’s a policy that’s long been in place, it will be strictly enforced from this month.

4. Price cuts

A drumbeat of newspaper reports and statements from agencies show substantial price cuts for sales of individual properties. A two-bedroom apartment in Kowloon Bay went for 28 per cent – or HK$1.9 million – less than the asking price in August, Apple Daily reported late last month. Another two-bedroom unit in a nearby district sold for 17 per cent less. According to Centaline Property Agency Ltd, that seller was willing to lower the price by HK$1.7 million, after some negotiation.

5. Tumbling sales

The value of new-home transactions in October fell to the lowest in six months at HK$12.5 billion. The number of transactions tumbled 43 per cent from September to 1,140, data from Midland Realty shows.

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