China buyers to undergird Hong Kong’s home prices, Standard Chartered says
Hong Kong’s home prices are unlikely to see significant fall amid solid demand, despite the increasing interest rates and the government’s measures to curb growth, Standard Chartered says.
“I can’t see Hong Kong’s property prices falling too much considering the demand and supply, and mainland investors are still buying overseas assets,” said May Tan, chief executive for Hong Kong at Standard Chartered Bank.
Analysts have expected that Hong Kong’s property prices to tumble after the US Federal Reserve’s move to increase interest rate by 25 basis points last Thursday, which was followed by the Hong Kong Monetary Authority, the city’s de facto central bank.
Hong Kong’s commercial banks have kept their prime lending rates unchanged, but home buyers are set to face higher costs on mortgage loans next year as the Fed foreshadowed raising interest rates for another three times next year.
Banks such as HSBC, Bank of China Hong Kong and Hang Seng have kept the prime lending rate at 5 per cent, while Standard Chartered, Bank of East Asia and Dah Sing Bank have maintained theirs at 5.25 per cent.
Althought the bank didn’t increase its lending rate, Tan said there’s little room for the bank to offer more preferential mortgage rates. However, she is relatively optimistic about the property market as she said investors are still seeking to allocation assets to properties which offer reasonable return on investment.
In addition to the growing interest rates, the Hong Kong’s recent measures, including an increase in stamp duty that took effect on November 5, have put pressure on the city’s real estate sector.
The Hong Kong government raised the property stamp duty to 15 per cent for non first-time buyers, the second time in three years, to tame soaring home prices.
Tan, also chairwoman of the Hong Kong Association of Banks, said the increase in stamp duty will dampen the housing demand in secondary market for the short run, while the impact on new residential properties sales would be limited. She led a delegation of the association in an annual visit earlier this week meeting mainland’s financial authorities.
“Some countries will also use stamp duty to restrict purchases, but when users and investors get used to it, the market will rebound again,” she said.
Imposing stamp duty alone may not be enough to curb Hong Kong’s property market frenzy, while Tan said the government should consider boosting supply by building more public housing.
She doesn’t expect significant changes in Hong Kong’s housing policies after the chief executive election next March, adding that the change in political landscape is not going to affect the investment sentiment.
“Hong Kong is not about one person, if you look at Hong Kong’s economy, it’s private-sector controlled,” Tan said. “The key for the leadership is really the confidence to invest.”
There will be uncertainty until the city’s new chief executive is elected, but she is confident that the private sector will continue to invest, she said.