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Peggy Sito

Hong Kong home prices will fall five per cent in three to six months within the Fed raising interest rates, say property agents.
Also, with new supply about to come on the market, developers will slash second-hand home prices to speed up sales, resulting in a downward trend next year, according to them.
“It is likely that the Federal Reserve will raise interest rates in this week’s meeting, which will have a negative impact on the Hong Kong housing sector,” said Sammy Po Siu-ming, chief executive of Midland Realty’s residential department.
Under the peg between Hong Kong and US dollars, Hong Kong interest rates move in step with US rates.
READ MORE: US interest rate rise may have dire consequences for HK property market
“Home prices in the city may fall five per cent within three to six months following an interest rate hike,” said Po.
The Fed is expected to start raising interest rates in its meeting this week, which would be the first such move since the summer of 2006.
The anticipation of a rate hike, along with expectations of more supply and negative news such as the weakening of the economy, have already prompted flat owners to cut prices to attract cautious buyers in the fourth quarter, according to Po. The trend will continue into next year as new home supply is on the rise.

“Small-sized flats will fall 8 to 10 per cent while luxury home prices will drop 5-8 per cent next year,” said Ricacorp Properties chief executive Willy Liu Wai-keung. Mass-market rents will fall 10 per cent, he said.
Their prediction is moderate compared with that of some investment banks that expect prices to fall up to 30 per cent by 2017.
Some 26,000 new units will hit the market next year. Half of them will be in Kowloon district, including Sai Kung and Tseung Kwan O.
“In view of the new supply, developers will cut secondary home prices and offer attractive financing terms to speed up sales. That will be ‘new normal’ next year,” said Po.
As a result, home prices are expected to fall 5-10 per cent next year but sales will pick up from this year’s low level, says Midland.
Ricacorp estimates sales of second-hand homes to fall 18 per cent year on year to 41,000 units, the lowest in 20 years. In the primary market, sales are expected to fall three per cent year on year to 16,100 thanks largely to aggressive financing by developers.
Ricacorp expects sales in the secondary market to increase 7 per cent next year to 44,000 deals and that of new homes to increase to 18,000 deals.



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Hong Kong property

How much will Hong Kong home prices fall if US raises interest rates?

TO GO WITH AFP STORY HONG KONG-ECONOMY-HOUSING, FOCUS BY DENNIS CHONG In this picture taken on July 31, 2014, a man walks through a playground as he looks at residential buildings in Hong Kong. The southern Chinese city has been hit with a serious housing shortage as property prices have doubled since 2009, becoming unaffordable for many. At a glitzy show stall at a new residential development in Hong Kong, property agents with loudspeakers promote the latest trend in the overcrowded city -- high-end 'micro-flats' which still come with an eye-watering price tag. AFP PHOTO / DALE DE LA REY

epa05004392 Construction cranes in front of mass residential housing in Tseung Kwan O, Kowloon, Hong Kong, 31 October 2015. Property analysts are forecasting a drop in home prices in Hong Kong, as a report released by investment bank UBS showed Hong Kong in second place to London as the city most at risk of a proerty bubble. According to data released by the Hong Kong Monetary Authority, new mortgage loans totalled 20.3 billion Hong Kong dollars (Euro 2.4 billion) in September, a drop of 13.4 per cent compared with August. EPA/ALEX HOFFORD

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READ MORE: US interest rate rise may have dire consequences for HK property market