According to a report published by UBS, the Bank of Hong Kong cut its best interest rate by another 25 basis points, from 5.625% to 5.375%. The reduction was greater than expected by 12.5 basis points, which was a positive surprise for the Hong Kong property market. The latest mortgage rate for real estate will drop from 3.88% to 3.63%. Compared with the latest rental yield of 3.6%, neutral interest spreads have been achieved. The bank expects the housing market to enter positive interest spreads early next year. However, after the US presidential election, the market lowered its expectations for interest rate cuts from the Federal Reserve.
UBS expects that the reduction in the best interest rate is greater than expected to support recent property market transactions. As a result, Henderson Land, Kerry Properties and Sun Hung Kai Properties should benefit. Conversely, given that the US 10-year yield rebounded to 4.3% from 3.6% in mid-September, and concerns about the devaluation of the RMB, the bank is cautious about real estate agents operating retail and leasing businesses in Hong Kong, namely MTR, Jiulongchang Real Estate and Link.
