Habitat Property founder says removal of property curbs to boost Hong Kong home sales - South China Morning Post

The removal of Hong Kong’s property cooling measures is likely to increase home sales by 5 to 10 per cent, but prices are not likely to see a sharp upswing because of high interest rates, according to luxury property agency Habitat Property.

Another round of interest rate increases could also be in the offing, especially if the Israeli-Palestinian conflict drags on any longer and worsens in the coming days, potentially leading to a surge in oil prices, said Victoria Allan, Habitat’s founder and managing director.

“ Hong Kong’s property market is soft at the moment and, I think, the market will probably soften a little bit more, and we’re nearly at the peak of interest rates,” Allan said. “Removal of the cooling measures is likely to impact sentiment and I would think it would increase the transaction volumes by 5 per cent to 10 per cent.”

Government officials have recently dropped hints that the property curbs could be removed soon, and the real estate industry is anticipating an announcement about this when Chief Executive John Lee Ka-chiu, Hong Kong’s leader, delivers his second policy address on October 25.

Hong Kong has since 2009 sought to stop excessive property price speculation after interest rates fell to near-zero globally following the Lehman Brothers collapse. The measures launched to keep a lid on such activity include tightened borrowing margins, higher duties on foreign purchasers, as well as on buyers who flip their assets within three years.

Hong Kong’s property market has, however, changed tremendously, especially since 2019. The city’s anti-government protests broke out that year and were followed by the coronavirus pandemic in the 2020-22 period.

Habitat Property’s Victoria Allan. Photo: Jonathan Wong

For instance, Hong Kong’s lived-in home prices declined by about 15 per cent between August and a peak recorded in September 2021, according to a government index. Property developers have also cut prices of new flats, with the likes of CK Asset Holdings selling units at its Coast Line II project in Yau Tong in August at prices last seen in the city in 2016.

Meanwhile, property transactions have also remained subdued this year, with 49,065 units changing hands as of Friday, according to data compiled by Midland Realty. The data includes the sales of car parking spaces and commercial buildings.

Last year, more than 52,000 property units were sold by the end of October. More importantly, the full-year tally for 2022 was the lowest in terms of transaction volumes since Midland started compiling data in 1997.

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With Hong Kong’s currency pegged to the US dollar, the city’s monetary policy has moved in lockstep with the US Federal Reserve’s policies. Hong Kong’s most recent tightening was in July, when the base rate was raised by 25 basis points to 5.75 per cent, higher by 5.25 percentage points in total since the Fed began its aggressive bid to tame runaway inflation in the US in March 2022.

“This is a global thing and having interest rates that are higher for longer is causing pain in real estate markets,” Allan said. “After watching what’s happening in the Middle East … that might push inflation up if oil prices surge and that might result in another interest rate hike next year.”

The Israeli-Palestinian conflict has re-emerged at a time when many analysts believed that tightening by monetary authorities across the global was almost over.

Hong Kong must act before ‘deep correction’ in property market: Midland analyst

“What’s happening in Israel and Gaza is heartbreaking and it’s a disaster on both sides,” Allan said. “If [the conflict] pushes oil prices up, it’s going to push inflation up and that’s going to end up with another interest rate rise.

“And the more that goes on and the worse it gets, it’s going to have consequences for everyone.”

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