HONG KONG – Hong Kong’s finance chief said on Thursday that he does not see a sharp risk to the city’s real estate market nor a need to adjust property control measures, as the financial hub braces itself for more interest rate hikes.
Finance Secretary Paul Chan was speaking after the Hong Kong Monetary Authority raised its base rate charged through the overnight discount window by 75 basis points to 3.5 per cent, its highest since October 2008, following the same move by the United States Federal Reserve.
Mr Chan said that while home prices in Hong Kong have dropped close to over 6 per cent in the first eight months as rising rates hurt sentiment, the property market depends on many factors including employment and the repayment capability of home owners.
“I don’t think there’s a risk of a sharp adjustment,” he said. “The market transactions are low, but there’s no need to adjust control measures.”
Current measures include stamp duties on non-Hong Kong citizens and second home buyers.
Hong Kong banks, which have lagged behind their US equivalents in raising rates in recent months, are expected to increase their best lending rate as soon as Thursday, the first increase since 2018.
Bloomberg analysts said Hong Kong housing is at risk of becoming the least affordable in 24 years, as the Fed rate hikes drive up borrowing costs in the territory.
The percentage of monthly household income used for mortgage repayments in Hong Kong could reach 60.1 per cent, the least affordable level since 1998, if mortgage rates rise to 3.5 per cent, according to Bloomberg Intelligence.
That could deter buyers unless household incomes surge or home prices decline further, Bloomberg analysts Patrick Wong and Francis Chan wrote in a note on Thursday. For the ratio to remain at about 56 per cent, current home prices need to drop by at least 10 per cent.
Home prices fell 1.6 per cent in July and have dropped 4.5 per cent this year, official data showed, as buyers turned more bearish due to rising interest rates and an uncertain outlook. REUTERS, BLOOMBERG