© Reuters. FILE PHOTO: A panoramic view of an apartment building in the Tuen Mun district of Hong Kong, China August 20, 2019. REUTERS/Kai Pfaffenbach
HONG KONG (Reuters) – Prices of private homes in Hong Kong fell in May after a brief rebound, as potential buyers wary of rising borrowing costs, the latest official data showed on Tuesday.
Home prices fell 0.3 percent last month from the previous month, according to official data, after a revised 1 percent gain in April. Month after month, prices fell from January to March. For the 12th year in a row, the Asian financial center has been named the world’s most unaffordable housing market by research firm Demographia.
Hong Kong’s economy has collapsed this year under some of the world’s toughest restrictions to contain the COVID-19 outbreak, but sentiment has improved after the city eased most of its measures and rolled out waves of new developments.
The number of home transactions in May jumped 59% from April to the highest level in 10 months.
Real estate agents said the drop in house prices was due to the housing index tracking mostly secondary market transactions, while sales in the new home market remained steady.
Some homebuyers are also becoming more cautious ahead of an expected rate hike in the second half of the year. The city’s interbank rate — linked to mortgage rates — is already rising.
The Hong Kong Monetary Authority this month raised the benchmark rate charged through the overnight discount window by 75 basis points to 2% after the Fed announced a rate hike by the same amount, even though the city’s major banks have decided to leave their best lending rates unchanged.
In fact, the central bank governor urged the public to “carefully assess and manage the associated risks” when buying property and mortgages.
One-month Hibor — the Hong Kong interbank offered rate, the benchmark for pricing mortgages — hit a two-year high this month.