CBRE: Hong Kong banks are relatively likely to raise their prime rates; the residential market is expected to enter a consolidation phase in the second half of the year.

The Hong Kong Monetary Authority, after the Federal Reserve raised rates by 0.25%, increased its base rate by 25 basis points to 4.25%, in line with the Fed's tightening measures. CBRE Hong Kong's Head of Valuation and Advisory Services and Executive Director, Cheng Haiyan, believes that the Hong Kong residential market is currently most focused on whether banks will raise their prime rates in tandem after the HKMA lifted the base rate by 25 basis points. CBRE believes there is a relatively high likelihood that major Hong Kong banks will raise their prime rates, and once implemented, this will directly push up the capped rates on most H-mortgage plans linked to the prime rate, increasing the borrowing costs for homebuyers. The market is expected to react to this, leading to a slowdown in residential transaction activity in the second half of 2026. According to the Hong Kong Monetary Authority, the base rate has been raised by 25 basis points to 4.25%. Nevertheless, the Hong Kong residential market performed notably better in the first half of 2026, with both transaction volume and property prices indicating that the market has gradually emerged from the bottom, reflecting a continued recovery in underlying demand. The firm expects the market to enter a consolidation phase in the second half of 2026. In addition to rising financing costs, stricter controls by the mainland on capital outflows may also affect investment demand and cross-border capital inflows into Hong Kong's residential market, further making buyers more cautious about entering the market.