Hong Kong Real Estate Report

Hong Kong Real Estate Report

Paul Chan Mo-po, today repeated his warning for home buyers to be cautious, saying the property market is “irrationally stimulated.”
Chan urged buyers to be careful about what they can afford, adding that further price rises are likely.

“The fundamentals of the property market have been changed, both in terms of supply and in terms of interest rates. Because of the interest rate normalization in the US we expect mortgage interest rates will go up,” Chan said. “Although the increase in mortgage interest rates may not be immediate, the trend is quite clear.”

The finance chief said it would not be appropriate for him to say whether any further attempts to cool the market will be made anytime soon

Hong Kong Monetary Authority chief executive Norman Chan Tak-lam said today local banks may start feeling a crunch as the US Federal Reserve increases the benchmark interest rate further and warned that this may affect mortgage rates.

He said that if the interest rate differential between the Hong Kong and US dollar widens further, the liquidity of banks here will be reduced.

“More people will switch Hong Kong dollars into US dollars to benefit from high interest rate. When this quickens, that will gradually lead to reduction of liquidity in the banking system,” he said.

But he stressed that it is not the only factor that will determine the pricing of mortgages.

“Individual banks have to consider the cost of capital and funding in deciding the pricing for the mortgage products. A couple of banks have recently raised the mortgage rates even in advance of the Fed’s decision top raise the interest rates,” he said.

Chan again called on the public to be careful when investing in the property market.

He said the current property market cycle differs from that in 1997. He said that, at that time, the downturn in the property market coincided with a lowering of mortgage interest rates.
In the current situation, Chan said, we may see a downward cycle for property prices accompanied by an upward trend in mortgage interest rates.

Shares fell in Asia today after the U.S. Federal Reserve raised interest rates by 25 basis points, as expected. Lower oil prices took a toll on energy-related shares across the region, while Japan’s benchmark slipped as the yen gained against the dollar.

Hong Kong real estate stocks headed south. Sun Hung Kai properties (0016) fell by 2.48 percent to HK$117.70. New World Development (0017) skidded by 2.26 percent to HK$10.34, while China Resources Land (1109) fell by 2.04 percent to HK$21.55.

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S. Jack Heffernan Ph.D. Funds Manager at HEFFX holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.

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