With interest rates likely to have peaked, Hong Kong home prices will soon begin to look up, Knight Frank analyst says

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Falling global interest rates should boost property prices, but any gains in Hong Kong could be delayed until there is a broader economic recovery locally and in China

Lived-in home prices in Hong Kong fell 1.1 per cent in July, the most this year, as rising interest rates kept buyers on the sidelines

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A residential project takes shape in Kai Tak, Hong Kong. The city’s housing market has cooled due to rising interest rates. Photo: Xiaomei Chen

Cheryl Arcibal

Published: 7:30am, 25 Sep 2023

Hong Kong will be among the first markets where interest rates are likely to fall next year along with the US, which could potentially boost the city’s property sector, according to analysts.

With inflation in the US, the world’s largest economy, showing signs of cooling down, normalising of interest rates may come earlier than in the UK and the euro zone, said Liam Bailey, global head of research at Knight Frank.

Hong Kong’s peg to the US dollar means an automatic adjustment to the city’s interest rates alongside the US.

“As rates begin to fall globally, that will be the trigger for improved affordability and will provide the conditions for house price growth, so the US and Hong Kong, in theory, will see prices grow earlier,” Bailey said.

The Federal Reserve, after raising interest 11 times since March 2022, has taken a breather, fuelling hopes that the rate hikes may have come to an end. Photo: Reuters

“That said, the conditions for stronger prices also require consumer confidence and positive household wealth conditions. In the US one can see how these conditions will be present in the near-term. It may be delayed in Hong Kong until there is a broader recovery in the local and wider China economies.”