Hong Kong property

Homeowners slash prices by up to 16 per cent as ‘fear’ grips Hong Kong in wake of prime rate hike

Higher mortgage rated unveiled by 11 local banks were followed by at least five homes being unloaded at discounts of up to 16 per cent on Thursday

PUBLISHED : Thursday, 27 September, 2018, 10:41pm
UPDATED : Friday, 28 September, 2018, 7:27pm

Fears of a drop in home prices are growing in the world’s least affordable housing market as at least five homes were unloaded at discounts of up to 16 per cent on Thursday, following higher mortgage lending rates unveiled by 11 local banks.

In anticipation of higher prime lending rates, more than 10 local homeowners reduced their asking prices by at least HK$1 million (US$127,951) in the last few days.

One 735 square foot flat at the Metro City development in Tseung Kwan O was sold for HK$10.48 million on Thursday, down 16 per cent or HK$2 million from the asking price of HK$12.5 million.

“Hit by the rise in the prime [lending] rate, the market is expecting home prices to drop,” said Monne Yeung, branch manager of Centaline Property Agency.

Roy Lam, regional associate director at Centaline, brokered the sale on Thursday of a two-bedroom 399 sq ft flat at Fanling Town Centre, which sold for HK$5.3 million after price reductions totalling HK$202,000, or about 4 per cent of the flat’s value.

Homeowners are accepting greater discounts to asking prices after the interest rate rise
Roy Lam, broker

“Homeowners are accepting greater discounts to asking prices after the interest rate rise, which generally ranges from 2 to 8 per cent,” Lam said. “Homeowners believe the rise in the prime rate among local banks will hit home prices.”

Lam expected the price cutting trend to remain until year end because of likely further rises in mortgage rates.

In another example, one 821 sq ft flat at The Orchards in Quarry Bay sold on Wednesday for HK$18.18 million, down HK$3.32 million or 15.4 per cent from the asking price of HK$21.5 million. The transaction was also 12.4 per cent below bank valuation of HK$20.76 million.

“The owner was worried the market would sour after the rise in prime rate so he was willing to sell it despite the price being below bank valuation,” said Jason Yuen, regional sales manager of Centaline.

Home sellers trim prices as Hong Kong’s decade of cheap money ends with higher interest rates

Meanwhile, a 840 sq ft flat at The Capitol in Tseung Kwan O sold last week for HK$10.5 million after the price was reduced HK$2.5 million, or about 19 per cent.

Billy Mak, associate professor of finance and decision sciences at Baptist University, said the sellers were probably under liquidity pressure and wanted to cash out early.

“The market is at a turning point,” Mak said. He added that home prices may drop 5 per cent in the next five to 10 months. “Banks may reduce valuations soon with all the signs [of a drop home price].”