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Property News Weekly Digest
2019/6/15
〈Asian Post, June 15, 2019〉Hong Kong home prices were down for a second consecutive week after hitting a record at the end of May, evidence that may suggest a broader correction is under way, according to experts.

The Centa-City Leading Index, a home price gauge compiled by Centaline Property Agency, showed prices for older homes dropped 1.43 per cent to 186.26 for the week to June 9.

"The uptrend of home prices has been hindered," said Wong Leung-sing, senior associate director of research at Centaline.

"The impact of the escalation of the US-China trade war has emerged, and ... in July we will see recent uncertainties in the city further affect the housing market."

The government on Thursday said it would postpone the tender of a residential site at the former Kai Tak airport in East Kowloon, citing blockage of public access to the Government Secretariat Tender Box during the clashes between police and protesters on Wednesday.

Analysts said the housing market would face headwinds as potential buyers became risk-averse amid growing questions on the political and economic outlook for the city.

"The sentiment has turned really bad now as no one will want to buy a house. It is such a big decision when we see protests in the city almost every day," said Vincent Cheung Kiu-cho, managing director of Vincorn Consulting and Appraisal.

〈Asian Post, June 14, 2019〉Violent protests against the Hong Kong government’s plans to amend the city’s extradition laws, coupled with the escalating China-US trade spat, a weakening yuan and higher interbank rates are taking their toll on the increasingly fragile economy, economists say.

“The market worries that the social unrest in Hong Kong may lead to an outflow of funds,” said Alvin Cheung, an associate director at Prudential Brokerage. “There’s a good chance the Hang Seng Index will continue to fall. How the extradition bill controversy develops will be a key factor that will influence the market trend,” he said.

Demonstrators took to the streets in Hong Kong on Wednesday to try to force the government to withdraw its proposed amendments to the city’s extradition laws.

At the same time, the trade tensions between the world’s two largest economies have reached a gridlock, and few expect progress in trade negotiations before the Group of 20 meeting in Japan at the end of this month. Analysts also believe the Chinese mainland will allow the yuan to weaken further to a level it has not breached since the 2008 global financial crisis, hitting Hong Kong-listed mainland companies, whose earnings are generated in yuan.

Surging Hong Kong interbank rates, which are likely to rise due to quarter-end demand for cash, may stay high until next month. The one-month Hibor (Hong Kong Interbank Offered Rate) has surged to 2.4 percent, the highest since October 2008, from 1.98 percent in late May. This will dampen real-estate market sentiment in the short term.

〈China Daily, June 13, 2019〉The market has finally decided to ignore the trade disputes initiated by US President Donald Trump and concentrate on other fundamentals, particularly the cost of funds.

Interest rate cuts are taking center stage in the minds of investors in the United States as well as those in Hong Kong and other major markets around the world. Stock analysts in the US predict that there will be at least one rate cut in 2019, while central banks in several European economies have seen the need to keep the cost of money low to keep their economies from contracting.

The Chinese mainland is widely expected to keep pumping money into the system to maintain economic growth at above 6 percent by lowering banks’ reserve requirements and initiating a host of fiscal stimuli, including tax cuts.

As in the past, a part of the increased liquidity would find its way into Hong Kong’s asset markets to hedge against further depreciation of the Chinese yuan.

The projected inflow of overseas capital would allow banks in Hong Kong to keep local interest rates at a discount to those of the US without putting too much strain on the linked exchange-rate system.

To be sure, low interest rates can eat into banks’ profit margins. But banks are more worried that raising rates could dampen demand for the highly lucrative mortgage loans, which, in turn, would depress property prices.

〈Business Daily, June 12, 2019〉Hong Kong's government has postponed the tender for a plot of residential land at the former Kai Tak airport, the first time it has taken such action, after violent protests against a controversial extradition bill rocked the city.

The tender, which was to take place today, was expected to fetch a record price of up to HK$20,000 per square foot, or HK$14.3 billion, according to surveyors' estimates. The land, Area 4C Site 1, could yield a floor area of up to 714,374 sq ft.

"The Central Tender Board announces that the closing time for tenders to be received through the Government Secretariat Tender Box by noon [June 14] will be extended until further notice, due to the blockage of the public access to the Government Secretariat Tender Box," the government said in a media release yesterday.

"Following removal of the blockage, the [board] will announce the extended tender closing time as soon as practicable."

Protesters surrounded the Legislative Council building on Wednesday to block lawmakers from debating the extradition bill, forcing the government to close its offices in the area.

Thomas Lam, executive director at property broker Knight Frank, said he could not recall any instance of a tender being withdrawn previously.

He expected it to be delayed for at least two weeks until the protests came to a complete end, as the government would be worried about the number of bidders, the potential prices offered by developers and the impact on government coffers.

〈China Daily, June 11, 2019〉Volatility is good for speculators, not so much for everyone else. As Hong Kong has the dubious distinction of having the world's most unaffordable homes, its army of aspiring homebuyers is a sorry lot. Having factored in rising interest rates, mostly due to the anticipated tightening monetary policy of the United States' central bank, the Federal Reserve, they have also to consider the impact of the trade war between Beijing and Washington on the mainland's inflow of capital into the local market.

Now, the Fed is signalling a reversal and may even cut rates, thanks to a softening of US domestic economic data and a slowdown of the world economy. Left unspoken are unpredictable economic policies of the White House, presided over by President Donald Trump. Hong Kong's property market, always sensitive to outside influences beyond its control, is now especially exposed.

Property transactions rose to their highest level since 1997 in the first five months of this year. Homebuyers spent HK$121.8 billion during this period, up 47.6 per cent from 2018. May, however, saw a slowing down of transactions, especially in commercial properties. Office deals fell 32 per cent last month compared to April. Analysts attribute the souring market sentiment to the impact of the trade war.

Meanwhile, high home prices prove durable even as more potential buyers take a wait-and-see approach. But these may change if, as predicted, the US Fed starts dropping rates. Richard Clarida, the Fed's vice-chairman, has gone on record to say the world's most powerful central bank will cut rates if the economic outlook takes a turn for the worse.