Outlook for Hong Kong’s property market brightens as end of interest rate increases in sight, analysts say
- Overall home sales in Hong Kong could reach 66,000 units this year, up from 45,000 last year, analyst says
- Major Hong Kong banks left their best lending rate unchanged even after the Hong Kong Monetary Authority raised the city’s base rate to a 15-year high of 5.25 per cent
With Hong Kong likely to have reached the peak of interest rate increases, sales of new and lived-in homes could hit 66,000 units this year, up nearly 50 per cent from last year, according to one analyst.
“With the interest rate hikes [most likely] coming to a halt, this will definitely benefit first-time buyers because they are quite price-sensitive and interest-rate-sensitive,” said Buggle Lau Kai-fai, the chief analyst at Midland Realty, adding that “majority” of potential buyers in the city are first-time buyers.
A total of 13,161 residential units, comprising 1,958 new homes and 11,203 lived-in units, have been sold in Hong Kong between January 1 and March 22, Midland said, citing Land Registry data.
The transaction volume was already about 25 per cent more than the 10,560 homes sold in the first three months of 2022, comprising 1,704 new homes and 8,856 lived-in units. In 2022, 45,000 homes were sold, a 27-year low.
Some 1,300 homes have been sold so far this month, Lau said, adding that the number will easily hit 2,300 for March, nearly double last month’s figures and a 28-month high.
“With banks deciding not to follow the latest US interest-rate hike, and the Fed likely to increase rates one last time in its next policy meeting, Hong Kong interest rates could be at their peak already or very close to it,” Lau said. “I believe the overall interest rates and mortgage rates are likely to hover around the current level for the remainder of the year.”
The border reopening with mainland China is also boosting the confidence of investors to snap up property as an economic recovery is also likely to bolster demand for homes in Hong Kong.
A rising prime rate will hurt the property market as mortgage-loan borrowers face higher monthly repayments, said Eric Tso Tak-ming, chief vice-president of local mortgage broker mReferral.
The payment on a typical HK$5 million (US$643,000), 30-year mortgage would rise by 1.6 per cent, or HK$347, to HK$22,452 per month, if the prime rate increases by 12.5 basis points, according to mReferral. A quarter-point increase would cost 3 per cent more, or HK$695, to HK$22,803.
“It is expected that the US interest-rate hike cycle will peak in or before May, while Hong Kong’s rate hike cycle is likely to have peaked,” said Ivy Wong Mei-fung, managing director of Centaline Mortgage Broker, a unit of Centaline Property Agency. “The property market has already eliminated interest-rate concerns. Thanks to many favourable factors in recent months, the market has revived in the first quarter.”
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Silicon Valley Bank collapse stuns tech firms around the world, global operations dismantled
The Fed’s eight consecutive interest rate hikes over the past 12 months to rein in runaway inflation in the US has inflicted unintended consequences on the US economy. It led to the collapse of three midsize US banks, including Silicon Valley Bank (SVB) - the biggest banking failure since the 2008 financial crisis.
“The SVB problem may prompt the Federal Reserve to slow down the pace of interest rate rises or even reduce interest rates,” said Raymond Cheng, managing director at CGS-CIMB Securities. “We think the mortgage rate in Hong Kong is likely to peak [because of] the lower rate hike outlook after the SVB issue.”
“While transactions year-to-date appear to have rebounded somewhat, it is likely the result of pent-up demand and lower prices,” he said. “With rising rates as an overhang, the market is still far from being buoyant.”
