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The prospect of US interest rates being kept near zero until late-2014 may keep a lid on any rises in Hong Kong home loan rates, but will not be a magic wand for the sluggish local property market, say analysts.
 'Although a low interest rate environment in the US means that mortgage rates will not go up a lot, this is not the most determining factor influencing the local flat market,' said Eric Yuen Chi-fung,  head of research at brokerage house GuocoCapital.  
 'Instead, soaring flat supply will be the main cause for falling home prices, as the government has boosted land supply,' Yuen said. 
According to CLSA investment brokerage, developers are expected to put 20,400 new homes up for sale this year, up 10 per cent from about 18,400 units a year ago. 
Another negative factor weighing on the property market, said Yuen, was the anticipated slowdown of economic growth. He expected growth in Hong Kong's gross domestic product to slow from 5 per cent in 2011 to 3 per cent this year.
Against this background, demand for flats from both local and mainland buyers would weaken, despite the fact that housing prices declined about 5 per cent from their peaks about six months ago and a GuocoCapital forecast that they would fall a further 10 per cent this year.
The comments come about a week after US Federal Reserve chairman Ben Bernanke  unexpectedly indicated that a low Fed Funds rate might be warranted 'at least until late 2014'. Hong Kong rates move in tandem with US rates to maintain the pegged exchange rate between the local dollar and the US dollar.
This meant that Hong Kong would only have room to slightly increase its mortgage rates by some 25 to 50 basis points this year, Yuen forecast. Home loan rates are currently around 2.5 to 2.75 per cent. 
Echoing Yuen's view, CLSA's regional head of property research  Nicole Wong Yim  said prospective homeowners would not rush to buy flats just because of low interest rates. 'Mortgage rates are just one of the considerations,' she said, and concerns about a slowing economy and an increasing jobless rate would weigh on the market. 
Wong said she believed the government would continue imposing the additional stamp duty aimed at curbing speculation and would also continue to sell land sites to ensure there was enough for new homes.
Declining demand and a surging  supply of flats would inevitably force home prices to drop by 15 per cent on average, she said. 
For prospective homebuyers like Max Cheung, the fact home loan rates could remain close to their present levels for about two years is not enough reason to buy now.
The 29-year-old works in the financial sector and has been saving for his first flat, but said he would not be tempted to enter the market yet.
'It is true that there is some comfort in buying when you know rates will not go up quickly,' he said. 'However, the risk that home prices will drop is too high. Also, I am not sure how much worse the debt crisis in Europe will become and how this will affect the economy and my job.' But Lee Wee Liat,  regional head of property research at Samsung Securities (Asia),  said the forecast from the US Fed implied rates would stay flat for three years, meaning the cost of funding would still be cheap and rental yields would stay higher than mortgage rates. 
'[There is] no incentive for homebuyers to sell their units cheaply in the market,' he said. 'The holding cost of property is very low and the implied price correction this year will not be too deep.' 
Due to the Lunar New Year holiday, sales in the secondary market during the week from January 23 to 29 fell by 46 per cent compared with the previous week, according to Ricacorp Properties.   There were 63 sales, down from 116 the week before. 
In the primary market, Samsung Securities said 47 units - including 20 units at Sun Hung Kai Properties' Chatham Gate in Hung Hom  - were sold during the weekend, up from only six between January 21 and 25.



Low rates will not lift dull market