This photo taken on Aug 3, 2019 shows a general view of residential and commercial buildings in the Kowloon district of Hong Kong, with the skyline of Hong Kong Island past Victoria Harbour in the distance. (ANTHONY WALLACE / AFP)
Real estate analysts from Centaline Property and Midland Realty predict Hong Kong home prices will remain stable even though the United States is expected to raise interest rates again soon.
The Centa-Salesman Index, compiled by Centaline Property to gauge changes in the prices of residential flats in Hong Kong, currently stands at 54.46, compared with last week’s 56.68.
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Wong Leung-sing, senior co-director at Centaline Property Research, said: “Even though the financial market anticipates the US will hike interest rates again next week, the city’s home prices are just exhibiting short-term fluctuation with no indication that it will demonstrate a downward trend.”
The Centa-Salesman Index, compiled by Centaline Property to gauge changes in the prices of residential flats in Hong Kong, currently stands at 54.46, compared with last week’s 56.68
“As the CSI index is hovering around 55 for the fourth consecutive week, it signals home prices will remain stable at the current level,” Wong added.
Sammy Po Siu-ming, chief executive of Midland Realty’s residential division (Hong Kong and Macao), added: “Hong Kong’s interest rate level is still low although the US already started hiking interest rates. Moreover, the supply of new residential flats cannot be increased in the short term; that will also support the city’s home prices.”
The price index of private domestic units tracked by the Rating and Valuation Department stood at 384 as of April, representing a cumulative slight drop of 2.51 percent in the first four months of this year. The index increased slightly by 0.49 percent on a month-to-month basis. In 2021, the index jumped by 3 percent compared with the previous year.
“Newly launched residential projects were generally greeted with lukewarm responses as home buyers adopted a wait-and-see in the face of weak local labor market and US aggressive tightening,” cautioned OCBC Wing Hang Economist Tommy Xie.
“Having weighted the downside risks in the housing market, we expect the overall residential property price in Hong Kong to fall 4 percent in 2022,” the bank economist predicted.
In early May, Hong Kong Monetary Authority raised the base rate to 1.25 percent after the US Federal Reserve lifted interest rates by 50 basis points in its meeting for the first time in 22 years. The US federal funds rate now hovers between 0.75 percent and 1 percent. The US Fed also announced that it will start shrinking its balance sheet from June by not replacing assets as they mature. These two factors together will have a fundamental impact on the global capital supply.
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Under the Linked Exchange Rate System in Hong Kong, the Hong Kong dollar interbank rates, the reference used to determine mortgage loan rates in the city, will move in tandem with US interest rate increases in order to keep the Hong Kong dollar exchange rate stable within the range of HK$7.75 to HK$7.85 per one US dollar.
So far, major mortgage loan providers in the city such as the Hongkong and Shanghai Banking Corporation, Standard Chartered Hong Kong and Bank of China (Hong Kong) have not raised their mortgage loan rates yet.
The aggregate balance of the Hong Kong banking system has remained above HK$330 billion ($42 billion), indicating the city’s banking system is still flush with liquidity, so banks will not rush to increase mortgage loan rates, real estate analysts reckon.