Positive Signals for Hong Kong's Real Estate Market!

　　Hong Kong's real estate market is finally getting a breather. The government has made its first cut to the benchmark interest rate in four years, reflecting the Federal Reserve's policy easing. On Thursday, the Hong Kong Monetary Authority lowered the rate by 50 basis points to 5.25%, the highest level since 2007. This move was widely anticipated, as Hong Kong's currency is pegged to the US dollar, closely following the Fed's actions.

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　　The Hang Seng Index rose 1.8%, with the tech index climbing over 3% and the property sub-index gaining 2.6%. Investors are optimistic about a rebound in real estate companies following the Fed's rate cut.

　　Federal Reserve Chairman Jerome Powell cautioned that the 50-basis-point cut exceeded most analysts' expectations, but it doesn't necessarily indicate that the central bank will continue to lower rates aggressively. Officials expect an additional 50-basis-point reduction by the end of the year, while the market is anticipating even larger cuts.

　　In recent years, high borrowing costs have significantly pressured the economy and housing market of this former British colony, with home prices dropping to their lowest levels since 2016. The Fed's shift comes at a time when Hong Kong developers' stocks are trading at historical lows, providing much-needed relief.

　　Financial Secretary Paul Chan stated, “The reduction in interest rates in the United States and Hong Kong will aid the operations of Hong Kong enterprises and have a positive impact on the asset market.”

　　Further cuts from the Fed would help buoy the real estate market. If the Fed cuts rates by 200 basis points by 2025, rental yields could exceed mortgage rates in Hong Kong, making investments more attractive.

　　HSBC Holdings, the largest lender in the city, has lowered its best lending rate from 5.875% to 5.625%, marking the first rate cut affecting mortgages and small business loans since 2019.

　　Analysts have suggested that Hong Kong's home prices might stop declining in 2025, as the Fed's rate cuts pave the way for cheaper mortgages. Rental yields could approach 4% and surpass the risk-free rate, stimulating investment demand. Additionally, the backlog of unsold homes has reached a 20-year high, which may limit the potential for significant price rebounds.

　　With the Fed's rate cuts freeing up space for central banks in Asia, attention is now shifting to how quickly and significantly these central banks will act, or whether they will ease policies at all in certain cases.