Hong Kong Housing Market prepares to recover after 7 years of recession

Morgan Stanley expected the Hong Kong real estate market to prepare for recovery after seven years of recession. Analysts led by Bravin Chaudhry, in a report released on June 19, said the prices of homes in the city are near their lowest levels, driven by the increasing demand of buyers from the Chinese continent, improving capital markets and the recent drop in interest rates. Analysts added: “Although we can be at an early stage, we see strong justifications for optimism that we are at the point of a recovery course that can stretch up to four or five years.” Property buyers of the mainland chief support the residential real estate market in Hong Kong, as the city’s rental returns are higher than those registered in Chinese cities of the first grade, which increases the demand for investment. Analysts added that the recovery of capital markets creates the impact of wealth, which in turn increases the demand for housing. The low interest rates form additional support for the market, as the interest rate under banks in Hong Kong for one month at its lowest level in three years, after the decline last month, for one month. However, there are still challenges such as the large number of apartments that are not sold, and the increase in mortgage cases in which the value of loans exceeded the market value of real estate, in addition to the growing unemployment rate in the city, according to the report. The report pointed out that some real estate development companies may find it difficult to continue their operations, even with the recovery of the market. The bank also warned about the situation of new world development due to its liquidity crisis. Morgan Stanley expects the prices of homes to fall, and to achieve 2% growth during the second half of the year.