With the increase in mortgage rate and falling economy, supply of new flats increase in the next 3 years, the property market price is expected to drop maybe 20% or more.
I think most of the properties in the market are over-priced or over-valued in the past 1-2years due to hot money and low interest rate. In addition to the mainland buyers poured into the market, there is an obvious trend of upward price adjustment for the property market. At this moment, however, the economic situation of the US and Europe is so fragile and Mainland China tighten the money supply in order to control the inflation problem, also the big enterprises, like HKBC begins to cut the staff number, the economic prospect of Hong Kong is not so optimistic in the coming two years. Therefore, I expect 15-20% cut in the property market in this second half of 2011, and if the global economic atmosphere and the stock markets have no obvious improvement, the situation will be worsen in 2012, may be 25-30% drop in the property market.
For the interest rate, there is a trend of upward adjustment in the HIBOR plan in the last few months, H can still be increased if the borrowing rate across banks rises in the future. That means the repayment of the mortgage loan for property owners who use the H plan will increase and this really happens now.
On the other hand, if the global economic situation does not improve in the coming years, enterprise have to cut operation cost in the future, Banks, Merchandising Agents,Trading firms, Shipping Companies, logistic trains,etc. will cut current nos of staffs or lower the salaries of the staffs. Under these circumstances, property owners will find it more difficult in repaying the mortgage loan, the tendency of selling the properyies will rise, especially for those investment purpose. I have a friend originally own a flat for self use, he applied for a re - mortgage last year to have 1 million to buy another flat for investment. He expect the price of the two properties will rise and the rental income can afford the mortgage payment of the second flat. Once the above situation occurs, the loading of the mortgage payment will rise for two properties at the same time, and still he has to pray he can keep his job and the tenant will keep on paying the rent ! He is now thinking to sell the second flat to play safe.
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