Hong Kong’s property prices are poised to decline by 10 per cent through March 2020, as the economy shrinks this year, according to a forecast by Morgan Stanley, the first bank to predict a contraction as street rallies across the city extend into their 12th week.

The “key drags” of the economy include “continued trade tension, disruption to economic activity due to unrest, as well as a potentially higher Hibor, which are likely to lead to broad-based slowdown in consumption, investment and trade in the second half of the year,” said Morgan Stanley’s economist Jenny Zheng, in a report.

Morgan Stanley joins a chorus of banks including DBS and Bank of America-Merrill Lynch that are now predicting home price in the world’s most expensive property market to decline from its June peak through the first quarter of next year. In the worst of three scenarios outlined by DBS, prices could plunge by between 20 per cent and 30 per cent next year.

Hong Kong’s property bull run, which had just regained its pace in the first half after a five-month correction, began to stumble again in June, after an estimated 1 million people marched on the streets on June 9 against an unpopular extradition bill, unleashing wave after wave of rallies, work strikes, sit-ins and public unrest. Over the past fortnight, protesters have clashed with police and forced Hong Kong’s airport to halt hundreds of flights over two days.

“We see no increase in residential prices for 2020 for now,” said Karl Choi, Greater China property analyst at Bank of America-Merrill Lynch. “Previously we were looking for a 5 per cent increase in prices this year. Now our new forecast calls for a 2 per cent drop [overall] this year, down 10 per cent from the peak in June.”

The slowdown is already felt, as shrinking transactions force some panicking owners to sell their homes for a loss. A flat measuring 848 square feet at Harbour Heights in North Point, the scene of violent clashes between protesters and local residents on August 5, recently sold for HK$14.88 million (US$1.9 million), a discount of 21 per cent to banks’ valuation, according to Centaline Property Agency, one of the city’s largest property agents.