As interest rates rise, Hong Kong is getting ready for a bigger drop in its property market.
Goldman Sachs predicts that home values will be 30% lower next year than last year. After an 8% drop this year, financial services firm Jefferies Group thinks there will be more drops. In addition, the secondary market has almost matched a record five-year-low.
Higher borrowing costs hurt an economy that is already suffering as people are leaving, strict “zero COVID” measures are being put in place, and the CCP is tightening its grip on the once bustling financial center of the area.
Centaline – Hong Kong’s major property agencies – predicts 65,000 property sales this year. If it is true, it will be the lowest property transactions figure in 26 years.
According to Centaline, in the first nine months of the year, Hong Kong only sold almost 9,000 new homes worth $12.6 billion. This number is over 30% less than the same period last year and almost 45% less than the whole year before.
Also, since March, the U.S. Federal Reserve and Hong Kong have been raising rates at the same time. The basic interest rate in Hong Kong is now at 3.5%, which is a 14-year high. Last month, commercial banks like HSBC and Bank of China (Hong Kong) raised their prime rates. This made it more expensive to buy high-priced items like homes.
According to Centaline, COVID-19 lockdowns will affect the first half of the year and rising interest rates will affect the second half.
Victoria Allan, managing director of Hong Kong’s leading property agency Habitat Property, said that the second half will be worse because mortgage rates will go up.