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Tuesday, July 19, 2016, 22:53

Homes market stabilizing as rate hike worries fade

By Oswald Chan
Homes market stabilizing as rate hike worries fade
A man places a balcony railing piece on a model of Park Vista, a residential property developed by Sun Hung Kai Properties, at a sales exhibition in Hong Kong earlier this year. Experts believe that as the negative impact of Brexit is brewing more trouble, global capital may flow back into assets denominated by safer currencies like the US dollar, the Hong Kong dollar and the Japanese yen. (Billy H.C. Kwok / Bloomberg)

Hong Kong’s residential-property market is poised to stabilize in the second half of 2016 after a year of stuttered growth, experts say.

They believe that as worries over fresh US interest-rate hikes fade, along with shrinking global bond yields, and stabilization of the Hong Kong dollar, it may fire the imagination of global investors in a more attractive local homes market.

US-based property research advisory firm Colliers International Group said Hong Kong’s residential homes market will be attractive to worldwide investors who are seeking higher yield returns despite lingering worries over the Brexit fallout.

The financial market now perceives that the pace of US interest-rate increases is likely to slow in the coming six months following intense market volatility unleashed by Britain’s decision to quit the European Union.

“This should benefit Hong Kong and other Asia Pacific property markets in the near term. All property market segments, especially residential, stand to benefit,” says a report by Colliers International Hong Kong Property Research projecting prospects for the second quarter of this year.

“While the Brexit impact on various currencies is still unfolding, we expect more capital to flow back into assets denominated by safer currencies like the US dollar, the Hong Kong dollar and the Japanese yen,” it says.

According to Midland Realty — one the city’s largest real estate brokers — property transactions in Hong Kong slumped almost 40 percent in the first half of this year from a year ago, with homes prices currently at 10 percent lower compared with the peak recorded in September 2015.

Other market experts say that although the local property market is deemed as having stabilized, it still awaits a soft landing.

“We still expect homes prices to edge down 10 to 15 percent this year,” said Daniel Shih, director of research and advisory at Colliers International (Hong Kong), on Tuesday.

“Given the severely stretched affordability, local homes prices could fall by 30 percent or more over the next three years if the Chinese mainland’s economy continues to decelerate further,” he warned.

“Negative real interest rates would gradually emerge by the second half of 2018 and this would also dampen property prices.”

Major Hong Kong banks have been engaged in a tug-of-war in a bid to woo mortgage-loan customers amid sluggish transactions in the city.

Key lenders, including HSBC, Bank of China (Hong Kong), Industrial and Commercial Bank of China (Asia), Citibank (Hong Kong) and Standard Chartered Bank (Hong Kong), recently slashed interest rates for mortgage loans to get more business.

After Citibank (Hong Kong) launched its mortgage-loan plan on the Hibor (Hong Kong Interbank Offer Rate), plus 1.5 percent, Standard Chartered Bank (Hong Kong) said it will offer similar mortgage loans to premier clients, while ICBC (Asia) will offer such loans to eligible clients seeking to borrow HK$4 million or more.
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