Hong Kong property price rise shifts to reverse gear

Hong Kong property prices are being cut as an interest rate rise looms.

Fears of an interest rate rise, the resulting mortgage cost increases and their effect on the already weakening yuan are forcing home sellers to reduce their asking prices. Hong Kong is infamous as the world’s most expensive city for both expats and citizens, with property prices at unbelievable levels and even high-salaried expatriates struggling to maintain their lifestyles. A fall in asking prices for prime and even slightly less prime apartments may sound like good news for newly arrived expat professionals, but coupled with higher mortgage interest rates it’s unlikely to make much difference to the monthly spend.

It’s interesting to note that a number of mid-to-low properties are now on sale for less than their bank valuations, as this indicates homeowners aren’t in a positive mood as regards the prospect of a sale. At the same time, a property auction postponed from last weekend due to Typhoon Mangkut saw brisk bidding for apartments in a new development close by Sham Sui Po. In the marketplace, discounts of around 12 to 13 per cent are now common, with realtors in the region believing a price correction of up to 15 per cent is now underway.

Commercial sellers in particular are attempting to unload unsold stock by cutting prices to attract new buyers, preferring to cash in rather than hold the properties and wait for the next period of price increases. The trend is expected to continue downwards, with major players in the field seeing a slowdown of interest as well as actual prices realised coinciding with a drop in square footage prices. The market downturn in this, the world’s least affordable housing market, is following on from a 28-month rally, with real estate professionals now certain the former upward trend is now heading for full reverse mode. Even so, according to one expert, the majority of Hong Kong residents still won’t be able afford a home.