Hong Kong’s downtrodden property market is expected to enjoy a revival in sentiment after the first cut in borrowing costs in nearly five years. It may not prompt a big rush to the showrooms just yet, as lower rates are baked into forecasts, according to industry analysts.There is still insufficient purchasing power in the market given the cumulative increase in mortgage rates over the past few years, said Martin Wong, senior director and head of research at Knight Frank Greater China. Property prices will remain under pressure in the short term, especially in the second-hand property market. Prime rates will fall more slowly.
The one-month Hong Kong interbank offered rate or Hibor, a benchmark for mortgage loans, fell to a 16-month low of 3.614 per cent on Thursday after the HKMA policy move. The rate reached as high as 5.659 per cent in November last year from 3.141 per cent in March 2022 when the Fed began its tightening move. A 466-sq ft, two-bedroom flat in Mei Foo was sold for HK$5.09 million on Thursday, marking the first deal in the market since rate-cut announcements, according to Centaline Property. It was transacted at 7.5 per cent below the asking price. The owner paid HK$5.8 million for it in 2021.
Many buyers have already returned to the market, as evidenced by higher transaction volume in recent months as prices began to look appealing. Hong Kong’s home prices have declined by 25 per cent since the market peaked in September 2021, according to government data.
The Fed decision signifies the start of the rate reduction cycle, and this will support the property market and boost transactions, said Ricky Wong, managing director of Wheelock Properties. The developer is preparing to sell more flats in Kai Tak, Wan Chai and The Peak next quarter, he added.
Many prospective buyers are taking steps to view properties. A total of 1,050 appointments were booked last weekend involving 50 major housing estates, according to Ricacorp Properties. The appointments have been increasing for eight consecutive weeks, reaching the highest over 19 weekends.
A total of 61 transactions were recorded last week, or 3 per cent lower than the preceding week as some buyers wanted to grasp the chance before this week’s expected rate cut, the agency said. The lower prime rates will save borrowers HK$795 per month, based on a HK$6 million flat and a 30-year loan at prime minus 1.75 per cent.
Recently, the number of buyers re-entering the market has started to increase, and developers have also indicated they will speed up the pace of launching new flats for sale in the near future, said Ivy Wong Mei-fung, managing director of Centaline Mortgage Broker.
Nonetheless, lived-in home prices in Hong Kong have continued to fall, dragging the official benchmark to its lowest level in nearly eight years in July, according to the Rating and Valuation Department. Prices have weakened by 7.4 per cent this year, and losses may be limited from here, UBS said.
We forecast prices to decline by around 5 per cent in 2024, implying that the price decline will stabilise by the end of this year, said Mark Leung, Greater China property analyst at the Swiss investment bank. Prices are [also] expected to stabilise in 2025. Transactions should increase.
Hong Kong’s property market in 2025 is likely to be more opportunistic than this year, Knight Frank’s Wong said. But as the new residential supply is still high, there are no conditions for a significant recovery in prices just yet, he added.
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