The Fed cuts interest rates by 0.25%! A brief look at the impact on the Hong Kong property market. Gao Li predicts that property prices will increase by 3-5% in 2026.

On the early morning of December 11th, the Federal Reserve announced its final interest rate decision for 2025, as expected, cutting rates by 0.25% to between 3.5% and 3.75%. So, how will the Fed's rate cut affect the future Hong Kong property market? This article summarizes various real estate agencies' views on the impact of the Fed's rate cut on the property market. mReferral Mortgage Brokerage Services: Fed's rate cut "relaxes" the Hong Kong mortgage market, sparking real estate demand. With the Fed's announcement of a rate cut today, the global interest rate environment is becoming more relaxed, mReferral Mortgage Brokerage Services points out that this is a significant benefit for the Hong Kong banking mortgage and lending market, potentially reducing housing costs, boosting demand for home purchases and exchanges, thereby revitalizing market transactions. mReferral Mortgage Brokerage Services stated that the Fed's rate cut will have a chain effect on the global cost of funds. Given that Hong Kong's financial system is closely related to international capital flows, the rate cut in the United States provides room for Hong Kong banks to lower their prime rates and mortgage rates (including HIBOR and the cap rate). In the past rounds of rate cuts, several Hong Kong banks have lowered their prime rates, significantly reducing mortgage payments, effectively reducing the pressure on homeowners to repay their loans. mReferral Mortgage Brokerage Services analysis suggests that if banks lower mortgage rates in line with the economic cycle, it is an attractive "window of opportunity" for those currently considering buying or exchanging properties. For buyers sensitive to mortgage costs and with limited budgets, a lower interest rate can actually reduce monthly payments, enhancing the advantage of owning vs. renting. mReferral Mortgage Brokerage Services believes that with a decrease in mortgage costs and a relaxed financing environment, combined with high initial interest rates prompting some buyers to wait and see, many rigid buyers, owner-occupiers, and investors may reconsider entering the market or exchanging properties. This return of demand, coupled with improved bank financing conditions, is expected to increase the volume of transactions in both the secondary and primary property markets in the short term. For the overall market, this round of interest rate changes can be seen as an important factor in stimulating trading and restoring market vitality. However, mReferral Mortgage Brokerage Services also reminds that although the macro rate cut sends a positive signal, whether it can be reflected in mortgage rates/bank prime rates still depends on individual bank capital costs, HIBOR trends, and bank risk control strategies. If banks choose cautious pricing or if HIBOR continues to remain high, mortgage costs may not necessarily decrease significantly. Even with loose rates, housing costs may still be higher than expected. Therefore, it is advisable for those planning to purchase or exchange properties to closely monitor the latest prime rates, the cap rate, and HIBOR levels of banks before applying for mortgages to determine their own financial capabilities. mReferral Mortgage Brokerage Services concludes that the Fed's rate cut injects potential benefits into the Hong Kong mortgage market, serving as an important opportunity to lower the cost of funds and release mortgage demand. For those interested in "getting in" or "exchanging properties," now may be a "waiting-bottoming/outbreak/market-entry" window. However, as the pricing and trends of HIBOR still remain variable, buyers should exercise caution and make rational judgments, not solely relying on the decision to purchase properties based on the "cut in interest rates." Colliers: Predicts 3-5% price increase in 2026 The Federal Reserve announced an interest rate cut early this morning, reducing the Federal Funds target rate range by 25 basis points to 3.50%-3.75%, in line with market expectations. This is the second rate cut since the 25 basis point cut on October 29 of this year, and the sixth rate cut since September 2024, with a total decrease of 75 basis points. Colliers' research department and retail consultant director Li Wanyin said that the Federal Reserve has been in a rate-cutting cycle since September of last year, accelerating in the second half of this year. The Federal Reserve subsequently announced the purchase of $40 billion in short-term Treasury securities on the 12th of this month, determined to increase market liquidity and facilitate capital flow investments in diversified sectors for stable long-term asset deployment. It is believed that this will also facilitate capital flow into real estate investments, stimulating transactions. Tom Ho, Senior Director of Valuation and Financing Assessment at Colliers Hong Kong, said that the rate cut will continue to boost the optimistic atmosphere in the Hong Kong residential housing market. Since April of this year, housing prices have been recovering from previous declines and showing a moderate upward trend. As of October of this year, the housing price index hit a 15-month high, rising 3.3% from its low point in March. Although there is little room for further reductions in Hong Kong's prime rate, driven by the policies encouraging the immigration of professionals and the demand from students, the housing market and rental market in Hong Kong have established a stable price foundation. The rate cut further unleashes purchasing power, and it is predicted that housing prices will increase by 3-5% in 2026. Tom Leung, Senior Director of Valuation and Consulting at Colliers Hong Kong, added that the rate cut will help alleviate financing and inventory pressures for developers. Since the second half of 2025, several new development projects have had ideal sales performance, reflecting a steady market demand. With improvements in the residential market investment atmosphere and reduced inventory and capital pressures, it is expected that sales of primary properties next year will remain optimistic, with developers having the room to gradually raise selling prices, and transactions and prices are expected to grow simultaneously. Centaline Property: Fed rate cut helps stabilize Hong Kong property market, boosting buyer confidence After the Fed announced a rate cut of 0.25% today, Centaline Property stated that this move will further reduce the global cost of funds and provide a positive impetus to the overall interest rate environment and property market sentiment in Hong Kong. It is expected to push down mortgage costs, unleash housing demand, and drive market transactions. Centaline pointed out that as Hong Kong is linked to the US dollar, and local banks and financial systems typically adjust in accordance with US interest rates, the US rate cut will put downward pressure on Hong Kong's mortgage and loan rates. Previous rate cuts in Hong Kong have proven to ease the pressure on housing supply, so the market is now optimistic about the upcoming reduction in mortgage loan costs, which will help alleviate the burden on buyers when repaying their loans. For those looking to purchase a property, the rate cut lowers the financing threshold, making owning vs. renting more attractive and possibly prompting some hesitant buyers to reconsider entering the market or exchanging properties. Centaline believes that the rate cut not only improves the mortgage environment but also boosts market confidence. If coupled with steady/improving local demand and supply, and unchanged policy environments, the housing market has the potential to rebound in the coming months. Signs of recovering transaction volumes have appeared in the Hong Kong property market after past rate cuts. Especially for buyers with rigid demands, small to mid-size units, and those looking to buy or exchange properties through mortgages, the current environment may be an ideal entry point. Centaline recommends that those interested in buying properties should closely monitor changes in mortgage rates and bank policies to seize the appropriate opportunities. However, Centaline also warns that interest rates are just one key factor affecting the property market, and future trends are influenced by multiple variables such as supply, policies, economic fundamentals, and market sentiment. Even with a decrease in financing costs, it does not necessarily mean that property prices will significantly rise. Long-term investors/buyers should make careful evaluations. Centaline emphasizes taking a long-term return-oriented approach and monitoring mortgage rates, bank repayment capacity, rental trends, supply and demand conditions, and changes in the overall economic environment as the basis for decision-making. Centaline holds a cautious optimistic view on the Fed's rate cut, believing that it brings substantial improvements to the Hong Kong mortgage and property environment, alleviating housing supply pressures and potentially stimulating a wave of buyer returns, leading to an upturn in market transactions. For first-time buyers, owner-occupiers, or long-term holders, the current period may be considered a relatively favorable "entry window." However, caution is advised in considering the future direction of the property market to avoid becoming overly optimistic about property prices due to the rate cut.