Hong Kong Property Market Set for Pain as US Interest Rates Rise
US Federal Reserve Chairman Kevin Warsh's comments at the annual economic policy symposium in Jackson Hole last month have heightened expectations of an impending interest rate rise in the US. The move would have significant impacts on assets and investors around the world.
Hong Kong property markets are particularly sensitive to higher interest rates, as the city's currency is pegged to the US dollar within a trading band of HK$7.75 to HK$7.85. Analysts said that any Fed movement would be mirrored by the Hong Kong Monetary Authority (HKMA), with borrowing costs linked to Hibor following suit.
According to JPMorgan Chase, mainland Chinese buyers have accounted for 29% of home sales volumes in Hong Kong and 37% of their value in recent times. In the second quarter of this year, mainland-based investors were the second-largest non-local buyers of commercial property assets in the city, behind Singapore-based investors.
With Hong Kong's debt costs rising in contrast to China's, the city is becoming less attractive to southbound capital from mainland China. Analysts said that this would have significant implications for Hong Kong's property market, with some predicting a decline in prices and sales volumes.