Dwindling hopes for an interest-rate cut this year could put a damper on surging Hong Kong home sales, according to analysts.
As of Tuesday, 5,109 new homes have been sold in Hong Kong in 2024, roughly half of the full-year total in both 2022 and 2023, according to data compiled by Midland Realty.
As developers rush to put new projects on sale at discounted prices to take advantage of the suddenly buoyant buying sentiment, property agents have raised their 2024 sales forecasts. Midland Realty, for example, now expects 18,000 new homes to sell this year, up from a previous estimate of 14,000.
Should the rate cut not materialise at all this year, buyers may hesitate to purchase homes, said Buggle Lau Kai-fai, Midland’s chief strategist.
“On the demand side, buyers may hesitate, while developers are still likely to price their projects well below the prices of second-hand units if they want to keep their transaction volumes higher,” he said.
Still, a lack of rate cuts may trim the top off of potential sales, according to Raymond Cheng, managing director of CGS International Securities.
“If we see decreasing interest rates, we forecast a 40 per cent annual increase in new home sales to 15,000 to 16,000 this year,” he said. “But without rate cuts, we are likely to see about a 30 per cent increase in new home transactions, to a range of 14,000 to 15,000 units.”
On the other hand, Hannah Jeong, head of valuation and advisory services at Colliers, believes the current attractive pricing will still lure potential buyers to the market.
“Rate cuts have been widely expected and factored in by buyers in the first few months of the year,” said Cathie Chung, senior director of research at JLL. “However, the consensus was for rates to be cut only moderately by 50 to 75 basis points this year anyway, hence any delay is expected to mainly affect market sentiment.”
That is the lowest in the same neighbourhood since Kerry Properties launched its Mantin Heights development at HK$19,000 in 2016, agents said. The price is also about 25 per cent below the In One Above project launched by Chinachem Group in May last year.
A lack of rate cuts this year will not affect all buyers equally, said CGS’ Cheng. Up to 40 per cent of current homebuyers are from mainland China and are not as sensitive to rate changes as local buyers tend to be, he said.
“There will be some impact on those who are buying for investment purposes and the local people who are price-sensitive,” he said. “If the US Fed keeps delaying the rate cuts, price-sensitive homebuyers are likely to delay their purchases.”
Hong Kong buyers pile into CK Asset’s Blue Coast flats on discounts
Hong Kong buyers pile into CK Asset’s Blue Coast flats on discounts
Hong Kong home sales picked up this year following two of their worst years since 1996 after the government removed all property cooling measures on March 1. These decade-old property curbs included the Buyer’s Stamp Duty designed to target non-permanent residents, the New Residential Stamp Duty for second-time purchasers and the Special Stamp Duty aimed at homeowners that resell their properties within two years.
The Hong Kong Monetary Authority has also taken action to encourage home sales. Homes valued at less than HK$30 million are now eligible for 70 per cent mortgage financing, compared with the previous rule that granted only 60 per cent financing for flats valued between HK$15 million and HK$30 million.