Hong Kong’s beleaguered commercial property investment market is likely to take a further hit as higher borrowing costs dent demand in the first half of this year, according to an analyst at MSCI, as some investors take massive losses.
Property investment volumes will be subdued for the next few months, falling some way below where they were even in 2022, said Benjamin Chow, head of Asia real assets research at the financial data company.
That is largely because at the start of 2022, the full impact of the interest rate hikes was not yet felt so it only came towards the end of the year,” Chow said. “And obviously, Hong Kong’s monetary policy and exchange rate policy is, in some sense, quite heavily influenced by the US.”
Earlier this month, the Hong Kong Monetary Authority raised the city’s base rate by 25 basis points to a 15-year high of 5 per cent in lockstep with the US Federal Reserve to maintain the local currency’s peg to the US dollar.
Chow’s pessimistic forecast comes after deal-making in Hong Kong and other markets in the region endured a dire 2022, according to a report on Thursday from MSCI Real Assets, a part of MSCI.
For the whole year, activity dropped by 41 per cent to just US$6.7 billion. Trading of offices continued to languish throughout 2022, with rising interest rates squeezing rental rates for office assets in the central business district.