HONG KONG -- The world's priciest housing market, Hong Kong, appears headed for a drop-off after a stunning ascent, as the U.S.-China trade war and interest rate hikes begin to take their toll.

This year, Hong Kong was ranked the world's most overvalued residential market among 20 developed global financial centers, according to the UBS Global Real Estate Bubble Index. The data shows even skilled workers need to work 22 years to buy a 60-sq.-meter flat, up from 12 years a decade ago.

But now, fears of a drastic price correction are spreading faster in the secondhand housing market, with some owners already slashing prices to lock in gains. In extreme cases, losses are being incurred.

In one high-profile episode, Chinese actress Shu Qi sold her 149-sq.-meter villa in Tai Po last month at a loss of at least 700,000 Hong Kong dollars ($89,000). She had purchased the property for HK$18.3 million in 2011. The news took Hong Kong homeowners by surprise who never expect a loss out of a property investment.

The crack started in August, when Hong Kong home prices dipped 0.076% from July, the first fall in 29 months. Many believe this could be the end of a yearslong bull run that pushed up values over 45% since March 2016.

The reversal came after the first rise in benchmark lending rates among the city's commercial banks in 12 years, following the U.S. Federal Reserve's eighth interest rate hike since 2015. Movements in the city's lending rates closely correlate with the Fed's, as the Hong Kong dollar is pegged to the greenback. This means homeowners could face higher mortgage payments.

Analysts now expect home prices in the Asian financial center to drop up to 15% over the next 12 months.

"The reset [of housing prices] has really started," said Nicole Wong, head of property research at brokerage CLSA. She said the sector is facing "the worst headwinds in 15 years" due to a combination of rising interest rates, a slowing economy and a depreciating Chinese yuan.

"We think a 15% correction is just a starting point," Wong added. "It could get worse," as the trade war could bring more downside risks.

Other brokerages estimate the upcoming decline in the range of 7% to 15% over the next 12 to 18 months.

Over the past 15 years, Hong Kong's property market has seldom disappointed investors. Residential prices have more than quintupled since 2003, while consumer prices only rose about 40% during the period, according to official data.

Yet, there are other signs the tide is changing. The average price of secondhand houses has edged down about 1% since mid-August, according to a survey issued by property agency Centaline.

Transactions have also dwindled as investors grow concerned about the outlook. In the 10 largest residential estates tracked by the agency, only 48 units were sold in September, the lowest number since record-keeping began in 2006.

"We think a 15% correction is just a starting point." Nicole Wong, head of property research at brokerage CLSA

In the firsthand market, property developers are offering aggressive promotions on new apartments, to speed up sales. Perks include bigger loans -- up to 100% of the total payment -- commission fee waivers, furniture and appliance coupons, and luxurious travel packages.

Some are making concessions on prices, too. Last month, mainland-based developer China Vanke launched its first fully owned residential development in the western New Territories, with offer prices lower than those for nearby secondhand properties and subsidized homes.

The market could be in for another hit, with Hong Kong chief executive Carrie Lam expected to announce more public housing initiatives when she delivers a policy address next Wednesday. Local media said her administration will use factory sites, farmland and reclaimed land for the projects.

A sharper fall in property prices could drag buyers into deep financial trouble. Technically, creditors can make margin calls to homeowners when the market values of their properties drop below the amount they owe. If they fail to pay the difference to the banks, the homes will be put up for public sale.

Still, experts say a slump like the one that started in 1997 -- when homes lost 70% of their value over the next five years -- is unlikely. They say the city's extremely tight supply of homes and attractive rental yields will help avoid that devastating scenario.

Some even suggest this is only a breather for the bulls.

"The problem is the government still can't provide enough land for housing," said Alan Jin, head of property research for Asia excluding Japan at Mizuho Securities.

The government estimates a 1,200-hectare shortfall of land for housing over the next 30 years. And less than half of all households own their homes. So despite the uncertainty, the supply-demand balance has not changed, Jin said. He believes home prices will rise again after a short-term correction.

Lee Wee Liat, head of property research at BNP Paribas, noted that property owners still collect much more in rent than the mortgages they pay to banks. While Lee described Hong Kong housing prices as "crazy," the analyst said this is not a bubble collapse scenario. He still thinks prices "will continue to go up and hit record highs."