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Will sharp rises in interest rates diminish Hong Kong’s love affair with property?
- Housing prices in the city have risen in three of the past five rate-rising cycles since 1993, according to JPMorgan
- Concerns about the city’s slowing economy, restrictions to control the pandemic could deter buyers too, agents say
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The unrelenting climb in Hong Kong’s residential property prices has been seen as one of the surest bets over the past decade, with the exception of a brief slump in 2020 during the coronavirus pandemic.
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The need to house a population of 7.4 million people, with little area available for expansion, and a general belief that property is a safe investment among many of the city’s residents has helped the housing market defy critics who say homes are overpriced, and push prices higher during three of the five interest-rate rise cycles since 1993.
However, the sharp increase in borrowing costs this year – four rate rises by the US Federal Reserve, so far, in a push to control inflation – combined with a slower-than-expected economic recovery in the city from the fifth wave of Covid-19 could pour cold water on the market, industry experts said.
Some homeowners are already selling their flats at deep discounts or losses, according to property agents.
“Due to the repeated outbreaks and the interest rate hikes in the United States, the pace of turnover for second-hand transactions has slowed down slightly, and some owners have also begun to face the reality and increase discounts,” said Wan Chan, chief district associate director at Centaline Property Agency.
Last week, the Fed increased interest rates by 75 basis points for a second straight month as the central bank tries to control inflation, which topped 9.1 per cent in June and is well above its 2 per cent target.
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