Although Hong Kong banks did not follow last week’s US interest-rate increase—leaving existing homeowners’ mortgage repayments unchanged—the policy move nonetheless had an immediate chilling effect on buyer sentiment. New-home sales fell by nearly 80% week on week, from 190 transactions to just 40, underscoring the market’s acute sensitivity to expectations of tighter financing conditions even before any corresponding rise in local mortgage rates.
The overall property market was already in a semi-frozen state due to sluggish secondary market transactions, but last week's 
interest-rate hike news caused a collapse in the primary market, which previously still had a steady stream of buyers. This market situation is equivalent to declare a death sentence to the property market.
According to the latest market news, the US Federal Reserve will raise interest rates twice this year, in October and December, each time by 0.25 percentage points. Hong Kong banks have likely only followed suit with one 0.25 percentage point increase.
Based on last week's new home market response, unless developers drastically cut prices to attract buyers, the number of new home sales per week will likely be pushed down to an extremely low level. New World Development's State Residency in North Point launched 140 units this Saturday at an average price of HK$21,666 per square foot-15% lower than the average price per square foot of semi-new properties in the same area. The sales of this project performed well last time, but the developer is still hesitant to significantly increase prices, showing their eagerness to sell.
New World Development's urban project on Hong Kong Island reduces price by 15%, and other upcoming new projects are highly possible to follow to cut the prices. If two or three more new projects launch with price cuts, property prices will likely experience a domino effect of decline.
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