A spate of bad news on the home front, including another rise in interest rates, has sent Hong Kong home prices and deal numbers tumbling.
The latest blow to market confidence came on Friday when the city's two biggest home lenders, HSBC and Bank of China (Hong Kong), raised their mortgage interest rates.
Despite price discounting in the secondary market of up to 7 per cent by anxious sellers, just 15 flats were sold in the city's 10 biggest estates at the weekend, with zero deals recorded in five of them. The sales were down by more than half from the 33 deals done in the 10 large estates over the previous weekend and compare with an average of nearly 40 deals per weekend in the year's first half.
Just six new flats sold over the weekend of September 17-18, the lowest weekend total for the year and down from eight the previous weekend, the regional head of property research at Samsung Securities (Asia), Lee Wee Liat, said. In the first half of the year an average of 100 new flats were sold each weekend.
The cause of the latest declines was Friday's increase in rates, the fifth for the year, agents said. The higher borrowing costs come on top of uncertainty about the global economic outlook, nervous bidding at recent land auctions, falling stock prices and the release by developers of new projects at prices that are close to, and in some cases lower than, prices in the secondary market.
HSBC increased the interest rate on mortgages based on the Hong Kong interbank offered rate (Hibor) from Hibor plus 1.8-2.3 per cent, to Hibor plus 2.3-2.7 per cent. Hibor is the rate banks charge for lending to other local banks.