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Peggy Sito

The renewed mortgage-lending price war between banks is unlikely to revive the lagging residential sector in the near future, according to analysts.

 But if the preferential offers being made ultimately stimulated market activity, there could be a fourth-quarter rebound, they said.

 The price war in the home loan market flared again this month, with HSBC and Hang Seng Bank relaunching cash-subsidy offers.

 Other banks, such as International Bank of Asia, offered a mortgage rate to new and second-hand buyers in the first six months as much as 1.25 percentage points below the prime, now running at 8.25 per cent.

 Meanwhile, Wing Hang Bank is offering a rate as low as 7.25 per cent in the first nine months.

 But despite the attractive offers, Hong Kong Property Services (Agency) managing director Michael Choi Ngai-min said residential sales had remained slow in the past two weeks.

 'Preferential offers by banks are not attractive enough to draw nervous buyers back to the market,' Mr Choi said.

 Sales activity in 32 leading housing estates dropped 30 per cent during the week of August 14 to 20, compared with the previous week, according to Midland Realty.

 Mr Choi said sales activity had been tepid since July, with a lack of positive news to encourage home-seekers to enter the market.

 He said the most recent batch of first-time buyers to have secured government home purchase loans had bought their apartments in the past two months. This had resulted in a short-term drop of genuine demand in the housing sector.

 Mr Choi expected sales activity to pick up in the fourth quarter, in anticipation of positive news such as the Disneyland theme-park development.

 'At the time, the preferential mortgage terms will become a stimulus to fuel a growing property sector,' Mr Choi said.

 He expected the new round of mortgage price wars to extend until the end of this year, with the lending rate possibly dropping to prime minus 0.5 percentage point for the entire loan period.

 Peter Wong Tung-sing, the head of Standard Chartered Bank's consumer banking for Hong Kong, the mainland and the Philippines, has said previously the bank wanted to see the market set the prime - at 8.25 per cent - as the floor limiting how far lending rates could decline.

 But he hinted that if other major lenders in the market reduced their rates further, Standard Chartered might be forced to follow suit.

 Liu Chong Hing Bank executive director Nam Lee-yick does not expect to see an extension of the price war in coming months.

 Mortgage supply would increase substantially as many primary projects would be on offer in the next few months, he said. Banks therefore would not need to compete for mortgages by offering low rates.



Loan war 'unlikely' to bolster residential sector in short term