TRADE WAR CAN DO MORE DAMAGE TO THE HOUSING MARKET THAN INTEREST RATE HIKES
貿戰比加息更影響樓市
Hong Kong's major banks have finally hiked up mortgage rates. Despite it being a minor 0.2% bump, it is likely to be the first of several rounds of rate increase to come as Hong Kong is expected to follow in the US Federal Reserve's footsteps later this year. Experts have even predicted that while Hong Kong had previously stayed put through multiple Fed rate hikes, this increase—the biggest Hong Kong has seen in years—may open the doors to more frequent rate increases. As a result, many big-time real estate investors are actively selling properties in exchange for cash. On the other hand, the introduction of a vacancy tax has forced some developers to make available units they were previously reserving, to reduce the financial risk of hoarding properties. Although rumour has it near 7,000 housing units will enter the market in August, at the time of writing, I haven't seen any signs of such a large influx of new homes arriving. In fact, so far this month, there has only been one medium-sized development opening for sale, and it's enjoying decent sales numbers. Other than that, there are only leftover units from years past, or luxury homes awaiting high offers.
The recent market is riddled with confusing information and unpredictability. While Carrie Lam's six new policy measures will no doubt alter the future supply ratio of public and private housing, the hottest topic at the moment is the escalating Us-china trade war. As the first rounds of new tariffs are placed, both countries will be negatively affected. While most pundits argue that China is likely to take a bigger hit from the trade war, it's impossible for the US economy to stay intact. For instance, American soybean farmers are already feeling the impact as China cancels contracts; some of them may even lose their livelihood for good as a result. On a grander scale, trade conflicts between the world's two biggest economies could potentially set the global economy back for years. Some suspect that the motives behind the Trump administration's targeting of Chinese trade is that the US government is threatened by the rise of China and its ambitious “Made in China 2025” plan. Will the trade war do the job? It's anyone's guess.
For those seeking homes for self occupation, property buying in Hong Kong is still more or less an investment move. Real estate, due to its immovable nature, can't be sold anytime, anywhere like stocks, because sellers need to first find buyers, and most home buyers must take bank loans to fund their purchases. When the housing market is on a downturn, banks may deny mortgages or significantly lower property estimates. In a word, banks have the absolute say in whether buyers can get the loans they need.
Of course, the global economic situation hasn't descended to such a bleak point yet, and borrowers are still very much welcomed by banks. However, given that Hong Kong funds are showing signs of outflow, capital costs are rising, and further interest rate hikes are inevitable, home buyers must take measures to prepare funds.