An aerial view of Wanchai, Hong Kong Island, one of the most densely populated urban districts on Earth. /VCG Photo
Record prices in recent years had forced banks to keep rates down in a bid to encourage borrowers, with house prices continuing to grow rapidly in the region. According to Midland Realty, the average price per square foot last month was 23,502 Hong Kong dollars (2,994 US dollars), up 18.5 percent on the same period last year.
However, in line with recent interest rises from the US Federal Reserve, there had been growing speculation that Hong Kong’s lenders would be forced to increase their rates.
Data from Hong Kong’s central bank the Monetary Authority show that as of June, Hong Kong residents held 1.258 trillion Hong Kong dollars’ worth (163 billion US dollars) of mortgage debt, with the average loan standing at 4.08 million Hong Kong dollars (519,780 US dollars).
It remains unclear how the rate changes will affect property prices in Hong Kong. According to Bloomberg Intelligence analyst Patrick Wong, “a ten basis points increase is just a mild one…take-up should remain healthy.”
However, a recent report by UBS suggested that higher borrowing rates could see property prices fall by between five and 10 percent by the end of 2019. If trade tensions between China and the US have a negative effect on Hong Kong’s economy, UBS warns that previous economic downturns have “immediately affected domestic sentiment of the existing as well new potential property buyers.”
HKSAR Chief Executive Carrie Lam Cheng Yuet-ngor said in her maiden Policy Address last October that affordable housing would be her “top priority,” with plans to help out first-time buyers with “Starter Homes” sold at below-market rates.