Hong Kong home prices weaken again as interest-rate hikes, mortgage pain, new supply undermine market recovery

Hong Kong’s lived-in home prices declined for the second month in June, with the city’s property market reeling from waning confidence and mortgage financing pain as banks raised borrowing costs to the highest level in 15 years.

Prices dropped 0.54 per cent on average in June from a month earlier, after weakening 0.93 per cent in May, according to an index compiled by the Rating and Valuation Department on Thursday. As a result, prices retreated just under 1 per cent in the second quarter, versus a 5.25 per cent jump in the first three months this year.

The short-term outlook appears to be gloomy, after the Hong Kong Monetary Authority lifted its base rate by a quarter percentage point on Thursday, in lockstep with the Federal Reserve’s policy tightening move. This prompted HSBC and its local peers to raise their key lending rates to levels last seen before the 2008 global financial crisis.

“The continued softening of the property price index in June mainly reflected the lack of incentives for buyers to enter the market,” said Derek Chan, head of research at Ricacorp Properties. “New housing units are being priced at a discount to market prices and this will further impact the secondary market.”

Some 28,000 new units could enter the housing market this year, or about twice the size of the Taikoo Shing housing estate in Quarry Bay, according to an estimate by Centaline Property Agency.

Higher borrowing costs came at an unfortunate time when the city is only starting to recover from a recession. The economy expanded 2.7 per cent in the first quarter to halt successive contraction in all four quarters last year. Home prices have fallen 12.3 per cent since the market reached an all-time high in September 2021.