NEW DEVELOPMENTS WILL TEST THE PUBLIC'S HOME-BUYING ABILITIES

Squarefoot - - MARKET VIEW 地產觀點 - Stephen Or Executive Director, Century 21 Hilltop Property Agency

Despite President Trump's complaints about the Fed's decision to raise interest rates twice so far this year, it's expected that rates will go up again in September. If that happens, the rate gap between Hong Kong and the US will further widen, probably resulting in the long-overdue rate hike in Hong Kong.

The outflow of Hong Kong funds has continued since April this year. So far, over HK$88.9 billion has left Hong Kong, lowering the aggregate balance to HK$90.8 billion. As the outflows pick up pace, it's only a matter of time before Hong Kong mortgage rates rise.

As the market became increasingly unpredictable, a new large housing estate opened in Tseung Kwan O, offering attractive prices slightly below second-hand home rates but no second mortgage loan plans with high loan-to-value ratios. Over 400 units were made available in the first round of offerings, so sales numbers for this project are likely to reflect the real home-buying abilities of Hongkongers. Prospect buyers will have to pass bank stress tests when applying for loans. In addition, two-bedroom units in this development are all priced at over HK$6 million, so buyers will need to fork out at least HK$1.5 million for the down payment, stamp duty and other administrative fees.

It's worth noting that while in the past many buyers relied on their parents to afford the down payments, the risk costs of doing so have increased. This is due to a combination of factors, chiefly the instability of the city's economic future as a result of the Us-china trade war. Many parents are now faced with the possibility of losing their jobs, and interest rate hikes are going to make mortgage loans an even heavier burden. Unless the trade war deescalates in the short term, we'll see a continuous decline in the number of home buyers using their parents' money in the next 18 months. Meanwhile, the downturn in real estate sales will inevitably prompt banks to lower property estimates, which in turn may lead to more young people trying to buy homes on their own. At the moment, both buyers and sellers are staying put as they wait for the Policy Address—to be announced in November—to answer some of their questions.

While I am optimistic about the future of Hong Kong's housing market in the long run, there's no doubt that property prices are likely to stay low in the near future. At the end of the day, nothing in this world is exempt from price fluctuations. When home owners are eager to offload, it presents great opportunities for investors to get good bargains—if you are well prepared, that is. As we keep a close eye on upcoming opportunities, accumulating savings should remain our top priority.

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