Hong Kong private home prices fell 2.256% in August, following a 1.4% drop in July, to their lowest level since February 2019, as market sentiment was hit by rising interest rates.
Real estate prices in the financial center fell 6.5% in the first eight months of this year. The real estate price index was 368.2 in August, down from an all-time high of 398.1 in September last year.
Rising mortgage costs and a poor economic outlook have added to the pessimism among homeowners. Meanwhile, home prices are expected to fall by around 10% for the year as a whole, the first decline since 2008.
Banks in Hong Kong raised their best lending rates by 12.5 points last week. It was the first rate hike in four years after the Federal Reserve’s third straight 75 basis point rate hike.
Cusson Leung, head of Asia real estate research at JP Morgan, described the unexpectedly small rate hike as positive. However, the real estate market is likely to weaken further in 2023 due to the weak global economy.
Last week, the Central Bank of Hong Kong relaxed the mortgage stress test requirements after raising the key interest rate. This allows property buyers to borrow more from banks.