Market Rebound Unlikely to Last Without Investors
Mainstream media have recently been reporting on the market rebound with gusto. Some pundits even predicted home prices will reach new heights in June. The logic behind this optimism is that the Federal Reserve suggested that there probably wouldn't be another interest rate hike in 2019, and that a rate cut might even be on the cards.
If mortgage rates maintain at the current level of 2.2%, which is at the lower end of the spectrum compared to the past few decades, it would in fact be a great situation for those buying homes for self occupation. In this case, it wouldn't matter much if the Fed doesn't cut rates next year. However, developers weren't rushing to release new units after Chinese New Year, which resulted in a spike in secondary market transactions and subsequently secondary home prices. With home sellers raising asking prices, most buyers are showing discretion and turning their attention to two newly opened developments instead. According to published figures, these two projects have received a combined 4,000 applications from prospective buyers; a standalone residential building, co-developed by New World Development and the Urban Renewal Authority, sold out all of its 294 units in a single day. A Yau Tong development, which has its rates set at the upper limit of first-time buyers' price range, is seeing modest sales despite offering high loan-to-value ratio mortgages. A small number of units remain available at the time of writing.
Given the limited number of units, the sales of these two new developments shouldn't be used as a market indicator; however, I do believe they can still serve as a decent reference. Most of the buyers we have seen so far are first-time homeowners, and the lack of property investors in the mix may be due to two things: either they are cautious about future economic uncertainties and have decided to hold back on property investment, or they find the properties to be overpriced and thus lacking in investment appeal. Meanwhile, firsttime homebuyers have also shown restraint, barely touching any offering that's over HK$9 million—such sensible decision-making is usually rare during market comeback periods. Given these circumstances, it's easy to see that without the participation of investors, once home prices approach the peak levels of 2018, the current market rebound, driven by firsttime buyers, will start to see its way out.