- Transaction volume continued to decline, although the market sentiment is a big factor
- Banks maintaining current lending rates, despite the HKMA increasing the base interest rate
- Proposal for reducing rebates for government rent and rates to landlords
- Car park spaces on the decline too
- Lots of activity in developing the Kai Tak region
Transaction volume continued to decline, although the market sentiment is a big factor
The fundamentals in Hong Kong are relatively strong:
- High liquidity
- Low loan default rate
- Low unemployment
- Restrictive mortgage loan requirements
However, the sentiment in the market has soured due with the China-US trade war tensions and the stock market decline.
Sino Land launched their new development, Grand Central, at a 14% discount to neighbouring estates. These units were heavily oversubscribed to, indicating there is buying power in Hong Kong when at the right price.
Many buyers believe that the second-half of 2019 will be a better time to buy properties. Also, Christmas to Chinese New Year historically tends to be a slow time for the property market (as shown in the graph below).
Banks maintaining current lending rates, despite the HKMA increasing the base interest rate
The HKMA increased its interest rate to 2.75%, following the US Fed rate hike. However, most banks in the city have said that they will keep their lending rates unchanged for now.
- HSBC, Hang Seng Bank — 5.125%
- Standard Chartered, DBS — 5.375%
Banks still have sufficient liquidity to manage the interest rate hike and maintain current lending rates. However, it is unclear whether this is a short-term strategy only to reach their end-of-year sales targets, or is a longer-term strategy.
As of end June, Hong Kong had up to HK$1.26 trillion in outstanding mortgage loans.
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Proposal for reducing rebates for government rent and rates to landlords
The government has been offering one-off rebates every year since 2007 to property owners, to reduce their operating costs. For 2018–19, the rebates have been up to HK$2,500 per quarter per property.
Recently there was a new proposal to decrease the rebates provided to landlords. However, it is unclear whether this proposal will pass. Landlords can simply offload the extra costs onto their tenants, either by increasing their asking rent or by adjusting their tenancy terms, requiring tenants to pay for the rates separately.
The cost of implementing this change is high and the impact of this is still uncertain.
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Car park spaces on the decline too
2018 was a record-breaking year for car park transactions. However, the number of parking transactions fell from a peak of 1,359 in June to just 372 in December, the lowest for almost three years.
Furthermore, experts expect the market slowdown may cause people to sell their cars, further reducing the demand for parking spots and lowering prices.
Lots of activity in developing the Kai Tak region
- Developers have purchased a few plots of land in Kai Tak in the last couple of months
- New World Development won a bid to build and run a sports complex
- Kai Tak MTR is scheduled to open
There is a lot of activity happening in the Kai Tak region, suggesting potential investment opportunities in the surrounding region in the upcoming years.
- HK Island Eastern had the biggest decline in gross price per sqft in December, followed by Sha Tin
- Hong Kong government plans to reduce private housing supply from 40% to 30% of overall housing target in the next decade.
- Mount Nicholson house sold for 7.4% (HK$ 58.12 mil) less than a similar unit in April this year.
- WeWork launched their 17-floor office in Lan Kwai Fong Tower, Central.