Hong Kong housing

Rising rates may crimp Hong Kong’s second-half home prices by 5 per cent, analysts say

An unusually large supply of 10,000 apartments and tightening mortgage rates are likely to crimp prices in the second half, analysts say.

PUBLISHED : Friday, 16 June, 2017, 9:02am
UPDATED : Friday, 16 June, 2017, 10:14am

Hong Kong’s soaring home prices will likely take a breather in the second half of this year, as buyers turn cautious in anticipation of an increase in mortgage rates, while an unusually large supply of new apartments floods the market, analysts said.

The city’s primary and secondary residential property markets have been softening in the last fortnight, indicating growing concern among potential buyers over the interest rates outlook, according to Louis Chan Wing-kit, vice chairman of Centaline Property Asia Pacific’s residential department.

HKMA raises rates after US Fed move, reiterates warning to home buyers

“Developers will offer their projects at competitive prices in view of more than 10,000 new flats available for pre-sale in the second half,” Chan said. “Property firms will continue to offer flexible financing schemes to entice sales.”

Chan said the number of sales transactions for second-hand homes could tumble 20 per cent, as developers provide incentives to lure buyers away from the secondary market.

Home prices are likely to drop by between 3 to 5 per cent in the third quarter, helping to pare back gains for the year to 18 per cent, according to Chan.

The Hong Kong Monetary Authority raised its base rate by 0.25 percentage point on Thursday morning, tracking the US Federal Reserve’s overnight move.

Victor Lui, deputy managing director at Sun Hung Kai Properties (SHKP) said the Fed’s rate tightening will have little impact on the Hong Kong property market, even if local banks eventually follow suit.

The rising number of new flats in the sales pipeline may have a stronger impact than any rate increase, he said.

During the next six months, SHKP will unveil eight new projects for sale, he said.

“Most of them are luxury projects and potential buyers will unlikely be affected by any movement in mortgage rates,” he said.

SHKP, the city’s largest developer by value, has earned more than HK$40 billion (US$5.13 billion) in revenue from selling more than 3,000 apartment units in the 12 months to June, analysts said.

“We have exceeded our sales target of HK$33 billion for this financial year,” said Lui.

The developer is gearing up to launch its upmarket residential development Park Yoho Genova in Kam Tin, although no launch date has yet been announced.

Ivy Wong Mei-fung, managing director of Centaline Mortgage Broker, said local banks are unlikely to

raise their deposit or borrowing rates in the near term.

Sharmaine Lau, chief marketing officer of mReferral Mortgage Brokerage Services, said the market remains supported by mortgage rates currently as low as 2 per cent, compared with 10 per cent in 1997, even as home prices have surged 48 per cent above the previous peak in 1997.

John Siu, managing director for Hong Kong at international property consultant Cushman & Wakefield, believes home owners would feel the pressure only when interest rates climb by 2 percentage points.

“If Hong Kong banks follow the rate rise [on Thursday], the extra monthly mortgage instalment will only be equivalent to the cost of a dinner,” he said.