CRIC: The United States significantly cuts interest rates by 50 basis points, exceeding expectations, Hong Kong property prices are expected to stabilize and stop falling

According to the Wisdom Financial APP, the Federal Reserve announced a 50 basis point rate cut, the largest since the 2008 financial crisis, and is expected to cut rates by another 0.5% within the year. Chen Yongjie, Vice Chairman of Asia Pacific at Centraline Property and Executive Director of the Residential Department, stated that the pace of rate cuts in the United States is more aggressive than expected. With interest rates peaking, property prices sensitive to interest rates will stabilize. He described the current situation as a good time to enter the market at the bottom. Chen mentioned that property prices have fallen by nearly 30%, and recently the overall property market sentiment has improved. There will be more focus on quantity before price, and if Hong Kong banks follow the rate cut in the United States, coupled with the effect of supply exceeding demand, property prices are expected to bottom out and rise before the end of the year.

Chen Yongjie pointed out that developers are seizing the opportunity of rate cuts to accelerate the pace of new property launches. It is estimated that at least 8 new projects will be launched in the short term, involving over 2,700 units. The battle for new projects will intensify after the rate cut. Chen believes that adopting a strategy of selling at or below market price can stimulate the intention of buyers and investors to enter the market, with an expected transaction volume of 2,000 units in October.

Centraline mentioned that in the past nearly 20 years, there have been two rate cut cycles in the United States, with Hong Kong property prices experiencing "ups and downs". In the most recent rate cut cycle from July 2019 to March 2020, the Federal Reserve cut rates 5 times, totaling 2.25%, resulting in a 4.2% drop in property prices. In the previous rate cut cycle from September 2007 to October 2008 in response to the subprime mortgage crisis and the financial crisis, the Federal Reserve made a significant rate cut of 5.25%, leading to a nearly 15% increase in Hong Kong property prices during the same period.

As for the current rate hike cycle in the United States starting from March 2022, with 11 rate hikes totaling 5.25%, although Hong Kong only raised rates by 0.875%, it had a huge impact on the property market, causing both prices and transaction volume to decline. The Centraline City Leading Index (CCL) fell from 178.72 points in early March 2022 to the latest 136.66 points, with property prices plummeting by 24% over 21 months. Currently, out of the 143 CCL constituent estates, as many as 29 have prices falling below HKD 10,000 per square foot, accounting for 20%.

According to Centraline's property market big data, during the current rate hike cycle in the United States, there were a total of 100,800 transactions for primary and secondary private residential properties in Hong Kong, involving a total transaction amount of HKD 937.88 billion. This represents a decrease of 5.9% and 12.8% compared to the 107,000 transactions and HKD 107.51 billion in the 21 months before the rate hike. Among them, the primary market accounted for 28,851 transactions, an increase of 3.8% compared to before the rate hike, while the transaction amount decreased by 3% to HKD 337.75 billion. This shows that developers are still maintaining a steady flow of goods during the rate hike cycle