Hong Kong’s property market set to revive gradually as rate cuts buoy sentiment, demand

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The first rate cut should lure more homebuyers back to showrooms, and prices are appealing after a 25 per cent slump from peak, analysts say

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A real estate agent in Jordan posts a sign saying that it is a good time to enter the Hong Kong property market on September 19, after the first rate cut in four years. Photo: Jelly Tse

Salina Li

Published: 6:17pm, 19 Sep 2024

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.

The view follows a decision by the biggest commercial banks to lower their prime lending rates at a measured pace or smaller margins. The decision came after the Hong Kong Monetary Authority (HKMA) cut its base rate to 5.25 per cent from 5.75 per cent, in lockstep with the Federal Reserve’s first policy-easing measure since 2020.

“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.”

HSBC will lower its prime rate by a quarter-point to 5.625 per cent from Friday while Bank of China (Hong Kong) will reduce its benchmark to the same level from September 23. Standard Chartered and Bank of East Asia will pare their prime rates to 5.875 per cent. The lenders had raised their lending rates by a total of 87.5 basis points in this cycle.

Buyers are seen crowding the sales office for the Blue Coast housing project developed by CK Asset Holdings in April 2024. Photo: Bloomberg

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.