As Hong Kong's residential property market navigates through a challenging landscape, analysts predict a potential rebound in property prices by 2025. According to Praveen Choudhary of Morgan Stanley, residential property prices are expected to rise by approximately 5% next year, marking the first annual increase in five years following a substantial 25% correction in the market. This anticipated recovery is largely attributed to lower US interest rates, which have prompted the Hong Kong Monetary Authority (HKMA) to cut its base rate from 5.25% to 5%. [0e91045e]
In conjunction with the HKMA's rate cut, six major banks in Hong Kong have reduced their prime rates for the second time this year. This has resulted in a decrease in mortgage payments, with typical payments for a HK$5 million loan dropping by HK$709 to HK$22,803. The current mortgage rate stands at 3.63%, which is expected to further stimulate demand in the housing market. [0e91045e]
Despite the positive outlook, the market faces significant challenges, particularly concerning unsold inventory. There are currently 108,000 units projected to be available over the next three to four years, raising concerns about oversupply. Additionally, home prices fell by 1.7% in September 2024, reflecting a 28% decline since the peak in 2021. Analysts remain cautious about the recovery, citing the economic performance of both Hong Kong and mainland China as critical factors influencing buyer confidence. [0e91045e]
The interplay between interest rate adjustments and economic conditions will be pivotal in shaping the trajectory of Hong Kong's property market. While buying momentum is expected to increase due to further rate cuts, the looming unsold inventory could pose a significant hurdle for sustained growth. [0e91045e]