2024-04-29 28Hse Editor
Leading bank HSBC recently adjusted mortgage interest rates and raised the lock-in rate cap of H-mortgages. For applications submitted from September 18, the lock-in limit increased from P minus 2.25% to P minus 1.75%. Meanwhile, the cap rate increased by 0.5% to 4.125% from 3.625%, and the cash rebate was significantly reduced.
Subsequently, many banks followed suit, including Bank of China, Standard Chartered, Hang Seng Bank, Citigroup and the Bank of East Asia, and also adjusted the H-mortgage cap rate to 4.125% starting from September 18. As advance notice was given, many people rushed to apply, resulting in a large increase in mortgage applications.
In view of this, CK Asset believes that the investor sentiment will rapidly deteriorate due the banks' increase in capped interest rates. Following the successful sale of its The Coast Line development in Yau Tong, the Group maintained its strategy of cutting prices by selling the car parks in two of its housing estates, including The Beaumount II in Tseung Kwan O and Harbour Glory in North Point.
The price of The Beaumount II car parks in Tseung Kwan O was reduced from HK$1.8 million to HK$1.28 million, a reduction of nearly 30%. Meanwhile, the price of Harbour Glory car parking spaces was reduced to HK$2.36 million from its original range of HK$3.62 million to HK$3.97 million, a reduction of as much as 35%. In the end, the developer sold 32 parking spaces and generated about HK$52 million in total.
Under the influence of factors such as interest rate hikes, property market sentiment has weakened as buyers have become more cautious when entering the market. What is the future of the Hong Kong property market? Bloomberg estimates that after banks raise mortgage rates, second-hand properties will fall by 10% in the next 12 months.
Bloomberg also pointed out that second-hand property prices have fallen by 15.4% since their peak in August 2021, which is also 8.3% lower than the 200-week average. Such a situation has never occurred in the past 20 years, reflecting that the overall upward trend of the property market may have come to an end, and people who have purchased flats over the past four years may lose money in the process.
In addition, Bloomberg forecasted that other large developers would follow CK Asset’s low-pricing strategy in their new developments to stimulate demand, promote sales, and attract buyers.
As banks increased H-mortgage interest rates, based on the current rental return level of 2.4% to 2.8%, renting may now be cheaper than mortgage repayment. In other words, renting a flat is more affordable than paying for it, and the monthly mortgage payment is more affordable than the monthly rental payment.
It is undeniable that as interest rates rise, it will be more common to observe this phenomenon when mortgage payment and rental fees are directly compared. However, buying a home involves many costs. To determine whether a unit’s rent exceeds mortgage payment, buyers should pay attention to several factors.
Firstly, when buying a flat, buyers can choose different mortgage loan-to-value ratios and repayment periods. Different choices will lead to different results. Therefore, it is not possible to conclude whether a flat’s mortgage payment or rental fee is cheaper.
Whether you choose to rent or buy a flat depends, most importantly, on your own needs and financial budget. In particular, buying a flat involves many expenses, including a down payment, stamp duty and management fees. Ultimately, these expenses should be carefully considered.
Like 22
