High-interest rates to hold back demand for property investments: CBRE

In 2023, the effective mortgage rate increased by 75 bps to 4.125%.

In the first half of 2024, CBRE expects interest rates to remain high, which will likely hold back investment demand in the property sector.

In 2023, the effective mortgage rate increased by 75 bps to 4.125% after Hong Kong major banks raised their Best Lending Rate by 12.5 bps twice to a range of 5.875% - 6.125%.

CBRE underscored that a lower interest rate environment will reduce the borrowing cost for residential buyers expected to enter the market as interest rates start to moderate, benefitting transaction volume.

Meanwhile, CBRE said the relaxation of the stamp duty for second home purchases will likely attract more customers in the market. 
The relaxed stamp duty will particularly support property purchases by mainland Chinese and overseas expats.
Homeowners’ ability to resell their flats tax-free after two years of holding instead of the previous three years will also improve market liquidity, said CBRE.

The CBRE also reported that total residential volume dropped by 4.5% in 2023, marking an all-time low of only 43,002 units.

In 2024, CBRE projects residential transaction volume to ramp up when an interest rate cut occurs, which may happen after 1H2024.

For residential prices, investment sentiment turned positive as borders reopened. Residential prices decreased for seven consecutive months since April 2023, reversing the four months of rally from the start of the year.

CBRE expects the downward trends to continue in 1H2024 given a high inventory situation.

Additionally, residential rents spiked by 6.4% for the first eleven months of 2023. CBRE expects this trend to continue until 1H2024.

Meanwhile, luxury residential improved in 2023 with  2,012 transactions for high-end residential. 

In 2024, CBRE expects high-end residential to benefit from the government’s new Capital Investment Entrant Scheme, which allows persons to make investments without a business through permissible assets.