Hong Kong property

What’s happening? Hong Kong home prices at record even amid 2017’s three rate increases

The disconnect is occurring because of strong demand by local buyers and mainland investors seeking to hedge against yuan depreciation

PUBLISHED : Tuesday, 14 March, 2017, 12:32pm
UPDATED : Tuesday, 14 March, 2017, 8:01pm

Hong Kong residential property prices appear at a disconnect with the uptrending cycle of US interest rates, thanks to strong local buying interest and rising demand from mainlanders seeking to hedge against yuan depreciation.

Home prices surged to a new all time high of 148.67 for the week ended March 5, according to the Centa-City Leading Index, undeterred by what some analysts believe will be three interest rates increases this year.

The US Federal Reserve will begin its two day policy board meeting Tuesday to decide whether to tighten policy for the first time since December.

The policy board will announce its decision on Wednesday.

Nicole Wong, the regional head of property research at CLSA, described the US rate hike as “ a storm in a tea cup” which will likely have little impact on Hong Kong property prices.

“The bigger storm is the continuing fund flows from the mainland to hedge against yuan depreciation,” she said.

Wong estimates that mainland funds flowing into Hong Kong in coming months could provide further fuel for the local property market.

The value of new home sales in Hong Kong last year was equivalent to 12 per cent of new home sales in the combined markets of Beijing, Shanghai, Guangzhou and Shenzhen.

“Small leakage of just 1.8 per cent from China’s tier one markets would lift Hong Kong demand by 10 per cent,” Wong said.

About 7.4 per cent of transactions in January were subject to the foreign buyer’s stamp duty, a level close to historical highs.

Thomas Lam, a senior director of Knight Frank said the local real estate market has digested a likely US interest rates tightening this week, amid months of speculation about the pace of further rate increases.

Lam noted that local Hong Kong banks have yet to follow the Fed’s quarter-point move in December.

“Home buyers will not feel the impact unless interest rate rise by 200 basis point in Hong Kong,” Lam said.

Joseph Tsang, JLL’s managing director and head of capital markets for Hong Kong, said there were a number of projects in the marketing pipeline as developers sought to lock in sales ahead of some listed firms’ fiscal year end in June.

“In fact, the upcoming three projects will be released for pre-sale until after the US Federal Reserve meeting to decide whether a rate rise or not,” he said.

On Friday, Cheung Kong Property will be releasing 188 units at Seanorama in Ma On Shan. The developer will raise HK$3.8 billion if all units are sold.

On the same day, Wheelock Properties will also release 372 units at its Monterey residential project in Tseung Kwan O.

On Saturday, Sun Hung Kai Properties will release up to 309 units at Cullinan West, atop the West Rail’s Nam Cheong Station.

The three projects will add 864 units worth more than HK$11 billion on the market.