Hong Kong homeowners speed up sales as surprise rate cut stirs mixed sentiments on rebound prospects

By Martin Choi,

Pearl Liu martin.choi@scmp.com,

pearl.liu@scmp.com

/ https://www.scmp.com/business/article/3065139/hong-kong-homeowners-speed-sales-surprise-rate-cut-stirs-mixed-sentiments?utm_medium=partner&utm_campaign=contentexchange&utm_source=EdgeProp |

March 10, 2020 2:21 PM SGT

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Flat owners and property agents in Hong Kong are taking advantage of the surprise interest-rate cut this week to speed up sales in a market hobbling through the coronavirus outbreak.

At least five home transactions were recorded at discounts ranging from 2.7 per cent to 6.25 per cent immediately after the Hong Kong Monetary Authority lowered its base lending rate on Wednesday in lockstep with the US Federal Reserve's first emergency rate cut since the 2008 global financial crisis.

A buyer decided to complete the purchase of a 729 sq ft flat at Bamboo Mansions in Whampoa for HK$12 million (US$1.54 million) after getting 6.25 per cent off the asking price, according to Centaline Property Agency. In Tin Shui Wai, a 650 sq ft flat at Tin Chung Court was sold for HK$4.08 million or a 5.1 per cent discount from the listing price, according to Midland Realty.

"When buyers see the interest rate environment is lower, they tend to be more willing to enter the market, before homeowners raise their asking price," said Timothy Yuen, a senior branch manager at Centaline. "The rate cut will actually make homeowners more confident."

Hong Kong cuts interest rate after Fed's surprise move to counter global coronavirus risks

The HKMA reduced its key rate to 1.5 per cent from 2 per cent, mirroring the Fed's 50-basis point cut as global policymakers took pre-emptive measures to counter the threat of coronavirus, adding to the 75 basis points cut in total last year as the city's economy slipped into a technical recession.

The policy easing offers some much-needed relief for the economy that has taken a turn for the worse since last year when anti-government protests slammed tourist arrivals and retail spending, and impacted the world's most expensive residential market. The viral outbreak has also upended a rebound in November when the government eased mortgage requirement rules to support home ownership.

In other signs of market activity on Wednesday, a 364 sq ft flat at MCP Central in Tseung Kwan O changed hands for HK$6 million, while one measuring about 600 sq ft at Island Resort in Siu Sai Wan went for almost HK$10 million, according to Sammy Po Siu-ming, chief executive of Midland Realty's residential division. Both deals were made at a 3 per cent discount, he added.

In Yuen Long's Spectra, a 202 sq ft flat was sold for HK$3.6 million or 2.7 per cent below the asking price, bringing the valuation to a new low for the housing estate, according to Ken Wong, a district manager at Centaline Property Agency.

Home prices fell by a quarter last year in the world's most expensive city amid protests, trade war

The rate cut, however, has stirred a sense of mixed blessings. Some homeowners are holding out, hoping to catch a stronger rebound later this year. On the other hand, some are worried about missing the opportunity to pick up a bargain.

M.T. Cheung, a 36-year-old banking executive, last month knocked HK$200,000 off the asking price for his 302 sq ft flat in Tai Wai to HK$4.8 million after putting the unit on the market in November. He does not plan to lower it again after the latest rate cut.

"More buyers have started to visit my home after I last cut the price," said Cheung, who is looking to upgrade to a larger unit. "The Fed cut helped ease my anxiety a bit, as I was worried that I might need to lower it again. I just hope the lower borrowing costs can help encourage more potential buyers, and help me sell my unit as soon as possible."

Kevin Ho, who works in the insurance industry, has been hunting for a suitable home since late last year before tying the knot in the near future. With the rate cut seen as aiding the market, he is concerned that homeowners could raise their prices, while buyers lose their bargaining power.

"I am not sure if prices will fall further or if I should wait a little bit longer," he said. "Since I need to get one anyway, I feel it is better to nail down one before prices rebound and I would not be able to afford it later."

Property consultants say the policy easing is unlikely to do much to revive an industry that is short of confidence. And mortgage rates are not likely to drop with banks like HSBC and Standard Chartered maintaining their prime rates after the HKMA move, according to Ryan Ip Man-ki, head of land and housing research at Our Hong Kong Foundation.

"Hong Kong will remain in a low-interest-rate environment this year, which will help developers and investors control the cost of capital and property prices to a certain extent," said Thomas Lam, executive director at Knight Frank. He maintained his forecast for home prices to weaken by 10 per cent this year.

"Regardless of the rate cut, transaction volume will nevertheless remain thin until the virus threats fade away," said Marcos Chan, head of research for the Greater Bay Area and Hong Kong at CBRE.

Additional reporting by Lam Ka-sing

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2020 South China Morning Post Publishers Ltd. All rights reserved.

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