Hong Kong Property Prices: Ripe for a Correction?

“The propensity for property price run-ups in Hong Kong SAR is rooted in a fundamental demand-supply imbalance at work for some time (…). Nevertheless, around the rising trend, there have been times when prices have slowed or hit a plateau before accelerating again. Prices have also declined around periods of heightened financial volatility (2008-09 and 2011-12). At present, the market appears to be experiencing the onset of relative calm after having gathered steam over the past 18 months”, according to the IMF’s latest report on Hong Kong.

The report also notes that “In the recent run-up, despite the well telegraphed increases in U.S. interest rates, households have continued to opt for floating rate mortgages which will reset in the aftermath of the Fed liftoff. Over 80 percent of new mortgages have been priced off HIBOR in recent months, up from close to zero in 2012. A turbulent and faster-than-expected increase in interest rates could therefore sharply slow property price growth if demand softens in response to the higher cost of borrowing. (…) The authorities noted that the property market may lose some momentum with the interest rate upcycle, but the overall impact was hard to predict. Much will also depend on how the demand-supply imbalance evolves.”

Posted by at 5:31 PM

Labels: Housing

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