The prices of Hong Kong homes are likely to fall by 20% over the next four-years, as borrowing costs increase and demand slumps because of rising unemployment, according to Goldman Sachs.

Goldman lowered its earlier forecast of a 10% drop over the next four years, to a 5% annual decline every year between 2022 and 2025.

“This cumulative 20% price fall from year end 2021 levels would be enough to compensate for the 230 to 240 basis points higher borrowing costs, as it restores affordability along with an expected pickup in household income of 10 to 15 per cent by then,” the bank said in a report this week.

Hong Kong, which was ranked by survey company Demographia as the world’s most unaffordable housing market for the 12th consecutive year this year, has posted a 2.9% decline in home prices so far this year, with prices dropping at a faster pace in February to their lowest since January 2021.

Home prices in Hong Kong have more than doubled over the last decade and reached an all-time high in September 2021.