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Surge in US dollar as Fed raises interest rates will further damage Hong Kong’s flagging property market, say analysts
- It will mark the end of the era of low interest rates that have propelled the city’s house prices to eyewatering levels, says mortgage broker
- Last month the Fed approved a 0.25 percentage-point rate rise and suggested it could lift it six more times to 1.9 per cent this year
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The surge in the US dollar as markets brace for a series of interest rate increases is likely to heap further misery onto Hong Kong’s flagging property market, according to industry watchers.
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Rate rises implemented by the Federal Reserve to contain soaring inflation will lure global capital into the US, strengthening the dollar, said Albert Wong, an honorary consultant at AA Horses Mortgage Brokerage Services.
As the Hong Kong dollar is pegged to the US currency, this in turn will end the era of cheap money that has fuelled Hong Kong’s housing market for the last two decades and made it one of the least affordable places on the planet to own a home, he said.
“Hong Kong home prices have in the long term been inversely correlated to the strength of the US dollar,” said Wong.
“It will mark the end of the low interest rates enjoyed by Hong Kong in the past 20 years, that have propelled the city’s home prices sharply upwards.”
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In April, the US Dollar Index, used to measure the value of the dollar against a basket of six foreign currencies, surpassed the level of 100. As of Monday it stood at 100.87, the highest since March, 2017.
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