Hong Kong’s housing market doomed to retreat as trade war deepens, says Credit Suisse
- The Swiss bank cautioned of rising mortgage rates and falling affordability as Hong Kong interbank offering rate (Hibor) ticks higher
- Credit conditions could tighten further as banks become more reluctant to lend
The escalation of the US-China trade war could derail the recent upbeat outlook on Hong Kong real estate, with Credit Suisse predicting that all segments of the property market will see a decline in prices this year.
The Swiss bank said credit conditions could tighten further as banks become more reluctant to lend, leading to a rise in the Hong Kong interbank offering rate (Hibor), the interest rate at which banks lend to each other.
“As the trade tensions escalate, we’re likely going to see slower economic activity in Hong Kong and also in China. Therefore we’re likely to see Hibor moving up or at least it’s not going to be softened to the current level. And therefore the impact on property prices is definitely going to be negative,” said Selina Sia, head of equity research for Greater China, Credit Suisse Private Banking.
The cautious view is the first by Credit Suisse on Hong Kong’s property market outlook this year.
“The market is still in denial right now. Basically they don't believe that the trade tension is going to escalate meaningfully ... and therefore it may take a little bit of time for reality to trickle through to the prices,” Sia said.