Rising cost of borrowing slows activity and prompts fall in homebuyer confidence
Hong Kong's property market may consolidate in the short term as a possibly longer than expected upward interest rate cycle is holding homebuyers back, experts say.
The prime rate has already jumped 225 basis points this year, and may climb as much as another 150 basis points on growing concerns about the United States Federal Reserve's tightening of monetary policy to tackle unexpectedly high inflation in the US.
Until last week, most homebuyers in Hong Kong were expecting a more modest 50 to 75 basis point increase, economists said.
'Anybody who thought the US interest rates had peaked is suffering from wishful thinking,' said Credit Suisse First Boston chief regional economist Dong Tao.
'All fundamentals are pointing to a further rate tightening in the US, and Hong Kong will match every move by the Fed,' Mr Tao said. He expected the Fed to lift its rate by 50 basis points by year's end, and another 100 next year.
