Hong Kong housing likely to turn least affordable in 24 years as banks set to hike lending rates

New Delhi: With the US Federal Reserve hiking lending rates on fears of an impending global recession, banks in Hong Kong too are looking at increasing borrowing costs leading to costly housing expenditure for its people.

The percentage of monthly household budget used for mortgage repayments in the Asian financial hub could touch 60.1%, the least affordable level since 1998, if mortgage rates rise to 3.5%, according to Bloomberg Intelligence.

That would effectively mean that homebuyers may not be able to afford houses or apartments of their own unless household incomes grow exponentially or home prices dip further, a move that seems unlikely as of now.

In Hong Kong, for the ratio to remain at about 56%, current realty prices need to drop by at least 10%.

Banks in Hong Kong “are very likely” to hike their deposit and lending rates by the end of the year if US interest rates continue to spike, Hong Kong Monetary Authority Chief Executive Eddie Yue said on Thursday reacting to the latest hike by the US Federal Reserve. HKMA lifted its base rate by 75 basis points to 3.5%, hours after the Fed’s move aimed at reining in the economy from hurtling towards recession.

In August, HSBC Holdings Plc and Standard Chartered Plc increased the cap on HIBOR-linked mortgages by 25 basis points.

For homebuyers in Hong Kong, buying an affordable apartment of choice may soon turn into a nightmare with lending rates being hiked every time the US central bank tweaks its rates as the world stares at an impending economic downturn.

With inputs from agencies.

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