Why Li Ka-Shing May Be Right Predicting Hong Kong Property Rally

Hong Kong Tycoon Says Property Rebound Could Last Years

Hong Kong’s richest property tycoon Li Ka-shing expects the rally in the city’s home prices to continue for a couple more years. He isn’t alone.

Even after the Federal Reserve raised interest rates this month, brokers and analysts expect further increases in residential prices in Hong Kong, where the cost of existing homes keeps setting new records.

“The property market is hot now,” Sammy Po, head of the residential department at Midland Realty International Ltd., said by phone. “The market has totally factored in the potential impact of the Fed rate hikes, therefore, buyers just keep buying as usual.”

Here are three charts that show why Li may be right:

Strong liquidity has allowed banks to keep borrowing costs low even as the Fed has increased benchmark interest rates, Bocom International Holdings Co. said in a note led by analyst Alfred Lau earlier this week.

The majority of the city’s newly-approved mortgage rates are based on the Hong Kong dollar interbank rate, known as Hibor, according to a January statement from the Hong Kong Monetary Authority, the city’s de facto central bank. The one-month Hibor is lower than the one-month U.S. dollar London interbank rate.

Buyer demand has intensified as authorities’ attempts to cool property prices have nearly halted the supply of existing homes for sale and have driven customers into new ones offered by developers. Transactions of new homes soared more than fivefold in the March 18-19 weekend after the Fed rate hike, with 520 units sold, Nomura Holdings Inc. Hong Kong-based analysts led by Joyce Kwock wrote in a Monday note.

Chinese developers have dominated Hong Kong’s land sales this year, splurging more than $3.8 billion to win all four residential plots tendered including a record sum for a waterfront site. Mainland firms have bought 57 percent of total gross floor area since the beginning of the year, almost double the 31 percent share last year when they embarked on a spate of acquisitions. 

Hong Kong home prices are expected to rise further on the back of surging land costs, said Tommy Xie, an economist in Singapore at Oversea-Chinese Banking Corp.

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Source: Bloomberg

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— With assistance by Emma Dong, Alfred Liu, and Molly Wei

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