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Hong Kong developers lower prices to generate sales amid interest rate hikes, high supply
- Developers will first test the water with low starting prices, seeking higher sales volume before achieving a higher price, Ricacorp Properties analyst says
- Rate hikes could limit the upside potential of home prices: JLL executive
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Hong Kong property developers are offering new projects at lower starting prices to stimulate sales in an environment of rising interest rates and increasing supply of flats.
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Sun Hung Kai Properties (SHKP), Hong Kong’s biggest developer by sales, for instance, on Sunday set the starting price for a 217 sq ft flat at its Silicon Hill project at HK$3.85 million (US$490,460) in its latest price list. This was lower than the HK$4.97 million it asked for a 291 sq ft flat in the first round of sales on June 3.
“Developers will first test the water with low starting prices, seeking [higher] sales volume before [achieving a higher] price,” said Derek Chan, head of research at Ricacorp Properties.
Homebuyers in the city whose mortgage is linked to the Hong Kong Interbank Offered Rate (Hibor), had seen their repayments go up since March, when the Hong Kong Monetary Authority (HKMA), the city’s de facto central bank, raised rates in lockstep with the US Federal Reserve. On Monday, however, the one-month Hibor more than doubled to 0.61 per cent, from 0.28 per cent when the US raised interest rates for the first time this year on March 17.
This is because the Fed announced its biggest one-time increase in 28 years last week, which prompted the HKMA to also raise Hong Kong’s base rate by 75 basis points to defend the stability of the local financial system.
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