Borrowing costs

Hong Kong house prices fall in May amid higher borrowing costs

General view of an apartment building in the Tuen Mun district in Hong Kong, China August 20, 2019. REUTERS/Kai Pfaffenbach

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HONG KONG, June 28 (Reuters) – Private house prices in Hong Kong fell in May after a short-lived rebound, the latest official data showed on Tuesday, as potential buyers were wary of rising borrowing costs.

House prices fell 0.3% last month from the previous month, official data showed, compared with a revised 1% rise in April. Month after month, prices fell from January to March. The Asian financial hub has been ranked by survey firm Demographia as the world’s most unaffordable housing market for the 12th consecutive year.

Hong Kong’s economy has collapsed this year under some of the world’s toughest restrictions to contain COVID-19 outbreaks, but sentiment has improved after the city eased most measures and there have been waves of new development launches.

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The number of home deal deals in May jumped 59% from April to a 10-month high.

Estate agents said the drop in prices was due to the housing index mainly tracking secondary market transactions, while new home market sales held steady.

Some homebuyers also became more cautious ahead of expected second-half rate hikes. The city’s interbank market rate – to which mortgage rates are tied – is already rising.

The Hong Kong Monetary Authority this month raised its base rate charged through the overnight discount window by 75 basis points to 2% after the US Federal Reserve announced a rate hike of the same margin, although the main banks in the city have decided to leave their best lending rates unchanged.

The head of the de facto central bank urged the public to “carefully assess and manage relevant risks” when making property purchases and mortgage decisions.

One-month Hibor – the Hong Kong interbank offered rate, a benchmark used for pricing mortgages – hit a two-year high this month.

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Reporting by Clare Jim; Editing by Jacqueline Wong

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