2025-02-21 28Hse Editor
The US Federal Reserve indicated yesterday that it is too early to discuss interest rate cuts, and the market expects interest rates to remain high this year, continuing to impact Hong Kong's investment sentiment. Yesterday, JLL released a review of Hong Kong's real estate market for the first half of the year and an outlook for the second half, predicting that the residential market in Hong Kong will decline by 10% in the latter half of the year, with negative equity cases expected to exceed 100,000.
JLL previously anticipated that removing cooling measures would not reverse the downward trend in property prices. Data from the Rating and Valuation Department shows that the private residential price index fell by 1.7% in the first five months of this year, indicating a 23.1% drop from the peak in September 2021.
Joseph Tsang, Chairman of JLL Hong Kong, stated that the prices of small and medium-sized residential units are expected to drop by about 10% in the second half of the year, while luxury home prices are expected to fall by 5% to 10% due to increased supply. Even if the U.S. cuts interest rates by 25 to 50 basis points, it is unlikely to significantly affect Hong Kong's mortgage rates.
He further explained that a 25 to 50 basis point cut in the U.S. would not impact Hong Kong, as the pace of interest rate hikes in Hong Kong does not follow the U.S. Therefore, the pace of rate cuts will not follow either, unless the U.S. enters an era of aggressive rate cuts, which would then provide an opportunity for rate cuts in Hong Kong.
Tsang also called on the government to establish a task force to assess the risk levels of the property market and formulate measures to mitigate risks. Additionally, he suggested providing low-interest loans to first-time homebuyers and implementing additional incentives for eligible talents, including incorporating residential properties into the new Capital Investment Entrant Scheme.
In the 12 months ending in March this year, the number of negative equity cases in Hong Kong surged by 400% to 32,000. If home prices drop by 10% this year, JLL estimates that negative equity cases will exceed 100,000.
He added that home prices have been falling continuously for three years since September 2021, and the property market has not experienced such a prolonged decline since the Asian Financial Crisis in 1997.
Tsang also pointed out that the Hong Kong Interbank Offered Rate (HIBOR) is currently at 4%, and the U.S. dollar deposit rates are as high as 5%. Local banks, other than note-issuing banks, are not making any profit from residential mortgages, and it is expected that the prime rate policies will narrow in the future.
The Financial Secretary recently stated that the local property market is currently stable. However, Tsang countered that they expect residential prices to fall another 10% in the second half, making a total decline of 30% from the peak. He added that further price drops will affect the development of the Northern Metropolis, as developers may have little interest in land auctions under the current conditions of falling property prices, high interest rates, and high construction costs.
Like
