Hong Kong investment market shows signs of rebound after US Fed rate cut

However, the property investment market remained subdued.

Hong Kong's investment market is showing signs of recovery following a recent cut in US interest rates, a report by Savills revealed.

In mid-September, the US Federal Reserve reduced its benchmark rate by 50 basis points. This led Hong Kong banks to lower their prime lending rates by 25 basis points, despite having only raised them by 87.5 basis points over the past two years, while the US Fed raised its rates by more than 500 basis points.

The rate cuts had an immediate effect on the stock market, with the Hang Seng Index rising by over 1,500 points in just one week. The announcement of further economic stimulus policies by the Central government gave additional momentum, pushing the index up by a further 2,000 points, a gain of more than 20% in less than two weeks.

However, the property investment market remains subdued, with banks maintaining a cautious stance on lending in the commercial real estate (CRE) sector. Many traditional property investors remain highly leveraged, although the rate cut cycle could provide some relief. Commercial transactions have been dominated by indebted investors seeking to reduce their debt, such as the sale of the 66th floor of the Centre in Central for HK$700 million to DBS, which became one of the largest owners of the building.

In contrast, the logistics sector has seen more activity, with JD.com’s property arm, JINGDONG Property, purchasing Li Fung Centre in Sha Tin for HK$1.8 billion. The 487,350 sq ft facility, currently occupied by Maersk, will be used to provide logistics services in the region.

Looking ahead, the market is expected to see a rebound in investment volumes in Q4, driven by cash-rich investors seeking bargains. However, the longer-term recovery will depend on improvements in market fundamentals and banks’ willingness to lend in the CRE sector.