Hong Kong home prices fell the most in four-and-a-half years in the week ended July 7, on concerns that interest rates will begin to rise if the U.S. Federal Reserve phases out its monetary easing program later this year.
Prices fell 1.8 percent during the week, the most since November 2008, according to an index compiled by Centaline Property Agency Ltd., the city’s biggest closely held realtor by agent numbers.
Home transactions fell to the lowest since 1996 in the first half after the government doubled stamp duty taxes on property deals in February to quell concerns that an asset bubble is forming. Homebuyers’ sentiment was further damped by signals that interest rate will soon begin to increase as the U.S. economic recovery gather strength.
“The drop reflects the impact of the Federal Reserve’s comments,” Wong Leung-sing, an associate director of research at Centaline, said in a e-mailed statement. “The local buyers are worried and we are seeing some homeowners agreeing to cut prices. The market is very weak.”
Fed Chairman Ben S. Bernanke on June 20 signaled that the central bank is prepared to begin phasing out its monetary easing programs later this year. Hong Kong’s interest rates track those of the U.S. because of the city’s currency peg to the U.S. dollar.
Bernanke on July 10 called for maintaining accommodation, saying it’s what is needed for the U.S. economy ’’for the foreseeable future,’’ even as the minutes of policy makers’ June meeting showed them debating whether to stop bond buying by the Fed in 2013.
The price index level posted by Centaline today reflected mostly transactions that were agreed between June 17 and 23, the realtor said.
Even with last week’s drop, Hong Kong home prices have more than doubled since early 2009 on an influx of mainland Chinese buyers, near record-low interest rates and a lack of new supply.