Update | HKMA warns US will soon raise interest rates despite US Fed staying put for now
HKMA chief says real estate market may be badly affected by an eventual rise in interest rates after US sticks with easy money policy
Hong Kong Monetary Authority chief executive Norman Chan said the US Federal Reserve's decision not to increase interest rates this week did not mean the low interest rate environment would continue for a long time and warned the local property market may be hit hard when rates eventually vault higher.
"The US economic foundation is good. The US may not wait much longer before it increases the interest rate. While the Federal Open Market Committee decided not to raise the policy interest rate last night, it is worth noting that 13 of its 17 members expected a lift-off within this year. So it is important that we should not think that the ultralow interest rate environment will last indefinitely," Chan said yesterday after the Fed's decision.
"In terms of Hong Kong's property market, the disconnect between the purchasing power of our citizens and the high valuations have become very serious for quite some time," he said.
"With the recent slowdown of the mainland and Hong Kong economies, it is important that buyers of property take account of the fact that ultralow mortgage interest rates will not last forever. They should carefully assess their income levels and repayment ability when they take out mortgage loans, so as to avoid running into financial difficulties when interest rates normalise and the property cycle turns," Chan said.
"The interest rate rise cycle will definitely happen. Investors and property buyers need to prepare for interest rates to go up."