Fears over rates cap price increases

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Aiden He

Developers appear to be price constrained ahead of a possible interest rate hike as secondary market trading volume plunged over the weekend.

Hong Kong Banking Association President Mary Huen Wai-yi said on Friday that some lenders may raise the capped rate for interbank mortgage plans offered in Hong Kong and the prime rate as the rate hike cycle looms.

The current HIBOR-based capped rate was designed in a low interest rate environment and banks can revise mortgage plans and prices based on assets and deposits, she said.

The interest rate for HIBOR-based mortgages is usually calculated by a one-month floating HIBOR plus a fixed interest rate such as 1.3%, with a cap of 2.5%.

While the one-month HIBOR stood at 0.27% on Friday, meaning that the real interest rate on these mortgages would be 1.57%, the impending US rate hikes are expected to drive HIBOR higher.

Perhaps this is why price conservatism is prevalent.

Henderson Land Development (0012) has released its second price list for The Baker Circle Dover in Hung Hom, offering 68 additional units at an average price of HK$23,968 per square foot, about 1% higher.

The first round of sales could take place this weekend and other lots could be launched before then, with a general sales manager, Thomas Lam Tat-man, saying that more than 500 checks have been received for 136 apartments, this which means a 2.7 times oversubscription.

In Tai Po, Sun Hung Kai Properties (0016) launched a fifth 80-unit price list for Silicon Hill Phase 1 at an average price per square foot of HK$17,641, about the same as the fourth.

In the secondary market, Centaline Property Agency said it recorded just seven transactions in 10 major estates over the weekend, a 14-week low that represents a 56.3% drop from a week ago. .

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