Investors may remain on the sidelines of Hong Kong’s property market because banks’ prime-rate cuts thus far are insufficient to serve as a catalyst and home prices are set to continue their slump, according to industry experts.
“The current interest rate is not a turnaround,” said Professor Chau Kwong-wing, director of the Ronald Coase Centre for Property Rights Research at the University of Hong Kong, adding that yields for 10- to 30-year US treasury bonds have yet to drop. “I would not say an interest-rate-cut cycle has begun.”
Property investments are long-term, but the current interest-rate cut is more likely short-term, he said. “Therefore, we won’t be seeing many investors entering the market.”
On September 19, the Hong Kong Monetary Authority (HKMA) began a policy easing cycle by following the US Federal Reserve’s half-percentage point cut of its base interest rate, the first reduction in four years. Hong Kong’s de facto central bank adjusts its own policy based on what the Fed does to keep the local currency’s peg to the US dollar.
For example, on a 30-year, HK$5 million loan priced at prime minus 1.75 per cent, the reduction cuts the mortgage rate to 3.875 per cent, meaning the monthly payment drops by HK$720 to HK$23,512, according to mReferral, a local mortgage broker.