HONG KONG – Hong Kong’s home sales uptick is expected to struggle with momentum due to the city’s weak economic outlook and elevated interest rates.
The number of new home transactions in the seven days after Chief Executive John Lee’s policy address on Oct 15 rose 20 per cent compared with the same period earlier, according to data from broker Midland Realty.
This comes amid several major launches, such as Sun Hung Kai Properties Ltd.’s new project in Kai Tak. Prices of second-hand transactions rose 0.5 per cent in the week of the policy address, according to Centaline data.
But property agents are skeptical on whether this growth will last. Despite the short-term improvement, Hong Kong faces challenges head, with high borrowing costs and poor economic sentiment are deterring more people from buying.
“The residential market is greatly affected by interest rates and economic circulation,” said Cushman & Wakefield Plc head of research Rosanna Tang. “Coupled with the cautious lending attitude of banks, the stimulus effect on the residential and non-residential investment markets in the short term is limited.”
Even after a rate cut in September, Hong Kong’s one-month interbank rate remains relatively high at about 4.2 per cent. Almost all of Hong Kong’s new mortgages are tied to a floating rate.
Hong Kong has also been weighed down by sluggish consumption, China’s slowing economy and geopolitical concerns. The city faces a “highly challenging” environment for growth in the near term, UBS Group AG economists said in a note after the policy address.
The measures are not strong enough to reverse the downward trend in housing prices, said Joseph Tsang, the Hong Kong chairman of Jones Lang LaSalle Inc. The future of Hong Kong home prices will largely depend on the effectiveness of mainland China’s economic stimulus
