HONG KONG (BLOOMBERG) - Hong Kong's home prices could fall as much as 10 per cent in the second half of the year after two major banks raised mortgage rates for new home buyers to the highest since 2008, according to Bloomberg Intelligence.
HSBC Holdings and Standard Chartered Bank are raising the cap on Hong Kong residential mortgage rates by 25 basis points for the first time this year. As a result, home prices could fall 5 per cent to 10 per cent in the second half, putting buyers' purchasing power to the test, Bloomberg analysts Patrick Wong and Francis Chan estimated.
The property market in the Asian financial hub is feeling the pain after four interest rate hikes by the de facto central bank this year. Hong Kong's home values have already fallen more than 4 per cent, according to property agency Centaline, after an exodus of residents amid political tensions and one of the world's most restrictive Covid-19 quarantine policies.
HSBC held more than 20 per cent of Hong Kong's market share in mortgages for both used homes and new homes in July, according to mReferral Mortgage Brokerage Services.
For a 30-year mortgage loan of HK$5 million (S$883,400), monthly repayment will now rise by HK$1,324 or 6.7 per cent for the home owner under HSBC's move, said mReferral, which expects more local banks to follow.
This may put further pressure on the world's least affordable property market, with Goldman Sachs Group predicting a 20 per cent slump by 2025. The market is also bracing for lenders to raise prime rates this year. All 12 economists surveyed by Bloomberg predicted that the prime rates will climb this year, some by as much as 100 basis points.
The Hong Kong Monetary Authority raised its benchmark rate four times this year, including a 75-basis point increase in June, in line with the Federal Reserve's hawkish move. Monetary policy in the former British colony moves in lockstep with the United States given the Hong Kong dollar's peg with the dollar.
In July, 6.5 per cent of total used-home transactions were sold at a loss, the highest since 2010, according to Ricacorp Properties. The company cited faster-than-expected rate hikes and emigration trends as factors hurting the market.