Preface: Over the past two years, the Hong Kong property market has been in a slump.

Despite a significant increase in market transaction volume after the comprehensive withdrawal of stringent policies, the decline in property prices has been unstoppable.

Many established Hong Kong real estate developers have faced a double whammy, with both performance and stock prices plummeting.

As we entered September, the anticipation of a Federal Reserve interest rate cut led to a surge in Hong Kong real estate stocks.

Especially after the Fed announced the rate cut on September 18, the entire Hong Kong real estate sector experienced a significant uptick, with companies like Cheung Kong Holdings (01113.HK), Wharf Holdings (01997.HK), Sun Hung Kai Properties (00016.HK), and New World Development (00017.HK) all seeing consecutive days of gains.

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Among them, New World Development's five-day increase was close to 22%.

For the Hong Kong stock market, the effect of the rate cut was immediate, with the Hang Seng Index soaring and achieving six consecutive days of gains.

The Hang Seng Technology Index also saw significant increases on September 19 and September 20.

Contrary to the bullish sentiment in the stock market, many institutions and renowned real estate experts believe that while the interest rate cut is beneficial to the real estate industry, the Hong Kong property market still faces short-term pressures.

On September 18 (local time), the Federal Reserve announced a 50 basis point cut to the target range for the federal funds rate, bringing it down to between 4.75% and 5.00%.

This was the Fed's first rate cut since March 2020, marking a shift from a tightening to an easing monetary policy cycle.

The Hong Kong Monetary Authority also announced on September 19 (Beijing time) that the base interest rate would be set at 5.25% according to the preset formula, taking effect immediately.

Additionally, major Hong Kong banks announced a cut in the Hong Kong dollar prime rate (P), such as HSBC Holdings (00005.HK) and Bank of China (Hong Kong), both announcing a 25 basis point cut from 5.875% to 5.625%.

Industry insiders have said that the main banks' reduction in the Hong Kong dollar prime rate (P) could further promote capital inflows into the Hong Kong market, having a positive impact on the Hong Kong economy and also benefiting the Hong Kong property market.

In response to the interest rate cut news, C.C.

Cheng, founder of Centaline Group, stated that the Fed's rate cut reflects a change in the overall trend, and it is expected to continue cutting rates for the next 2 to 3 years until the end of 2026, when the rate is expected to drop to about 2.9%.

His stance is very clear, possibly reflecting the Fed's desire for a more significant rate cut effect.

Liao Weiqiang, President of Ricacorp Properties, also recently said that the leading banks in Hong Kong, HSBC and Bank of China, followed the rate cut by 0.25%, marking the first time in recent years that local banks have cut rates after a long period of continuous rate hikes and high interest rates, which has surprised the market and greatly helped to stimulate the long-dormant property market.

Looking at the current market, funds are very abundant, and it is believed that the rate cut can drive some funds to flow into the physical asset market.

HSBC also released a report pointing out that the fundamentals of the Hong Kong property market are gradually improving, and the start of the Fed's rate cut is a positive signal for the industry cycle.

HSBC believes that the primary improvement after the rate cut is the reduction in financing costs, followed by better property sales.

HSBC also warned that over the past few months, the one-month Hong Kong Interbank Offered Rate (HIBOR) has fallen sharply by more than 190 basis points to about 3.7%, which will reduce the financial burden on Hong Kong property companies.

It will also reduce the volatility of Hong Kong property companies' profits and increase the predictability of their dividend payment capabilities.

C.C.

Cheng expects that the Hong Kong property market will have a "turning point" and that the market has reached the bottom.

However, property developers still need to offer "significant discounts" for the pricing of new properties, and the overall market still needs to wait for the overall economy, retail, and stock market to recover before there can be a significant improvement.

C.C.

Cheng believes that the property market will improve in the fourth quarter of this year, but it still cannot make up for the decline in the first three quarters of this year.

Zeng Huanping, Chairman of Jones Lang LaSalle Hong Kong, believes that the U.S. interest rate cut is good news for the market.

However, interest rates are only one of the factors affecting the property market, and the trend is still influenced by other economic factors, with the economy still being weak.

At the same time, developers will take advantage of the good news of the interest rate cut and launch a large number of properties, increasing competition, and new property pricing will be more conservative, or even lower, to attract buyers, and the pressure on the property market still exists.

Liang Zhijian, Chairman of the Real Estate Construction Association's Executive Committee, believes that Hong Kong local banks following the U.S. interest rate cut will reduce the interest burden on homebuyers, increasing the opportunity to buy a home, and also reducing the burden on investors.

He believes that the market atmosphere and transactions are beginning to improve, and the burden of selling homes is also reduced.

However, Liang Zhijian emphasized that property prices will not rise immediately in one or two weeks, but there is a chance to slowly stop falling and rise.

Indeed, the Hong Kong real estate market still faces issues such as oversupply in the short term, which will take some time to gradually resolve.

However, the start of the interest rate cut cycle is undoubtedly a very important positive factor for the market, significantly enhancing the confidence of the market in the medium to long term.