How The Hong Kong Property Market Could Fare in 2016In a few short weeks from now we’ll usher in The Year of the Monkey, and from a Western point of view, that could be a sign of precociousness, sneaky cleverness or troublemaking. The phrase is “cheeky monkey” after all. People born in Monkey years (among them Leonardo da Vinci, Julius Caesar and Tang Empress Wu Zetian) are, perhaps unsurprisingly, marked by intelligence and creativity, curiosity, mischievousness and practical joking that can leave a bad taste in others’ mouths. Hong Kong’s real estate market can do without the practical joking and troublemaking this year, but creativity and cleverness would be welcome as the city stares down a flagging retail sector, affordability issues and wrangles with a long-overdue interest rate hike. Feng shui master Philip Wong looks into the proverbial tea leaves to determine where the stars are leading the SAR this year.

Elemental Clash

First things first: Is this going to be a generally good year or a bad one? Wong, unsurprisingly, sees conflicting messages on that. Spring begins at precisely 6pm on February 4 — before the official start of the Lunar New Year — but clashing elements are set to cancel each other out. “The dominance of the Wealth Star is supposed to benefit financial, economic, property and other sectors that associate with the Gold Element,” begins Wong. “But as it clashes with Fire Element, this will only lead to higher chances of monetary loss.” Wong also points out the so-called Year Branch of the Wealth Star indicates instability in global stock and property markets and the corresponding Hour Branch hints at capitals flows slowing down. Whether or not that can be linked to climbing interest rates is anybody’s guess — the Fed officially raised rates 25 basis point on December 16 — but pricier financing certainly seems to connect with rates.

The popular thinking is that either way, transaction volumes are going to remain muted, if they don’t drop further, and there Wong agrees with the major property analysts. “Investment markets are lacking vitality, as people act more conservatively. Add to this the clash of Gold and Fire elements and property prices are on a downward trend,” says Wong. While Hong Kong isn’t going to flirt with “buyer’s/renter’s market” status, Edina Wong, senior director, residential leasing Savills backs up Wong. “I don’t’ think you could say [it will be a] tenant’s market. I would say prices are set to soften. There is additional supply, but it’s largely in the mass market … Prices are drifting downwards but it’s not steep. I wouldn’t call it a renter’s market.” Colliers International predicts rents will indeed go up, just at a slower pace (3 to 5 percent), with prices coming off as much as 10 percent, 15 percent in the luxury sector.

Colliers also predicts that turning point could come at mid-year, and on this Wong digresses — but only a bit. “The power of the Wealth Star will be at its peak after Autumn commences. Property price will fall back to an appropriate level accordingly. As Autumn commences before the seventh and eighth Lunar months — equivalent to the time between August and September — market sentiment will go up during that period,” he predicts.

Push and Pull

Does that mean autumn is the time to buy? First, it’s back to that Wealth Star, because its position represents our environment — and those ever-present external influences, like the Fed. The hint of instability means, “The chance of an interest rate hike is high,” according to Wong, which indeed came the next day.

In fairness, an interest rate hikes could be a good thing. For anyone who leaves money in the bank (or long-term savers) or those of us with an interest-reliant income could see moderate gains. A likely refocus on stock fundamentals in the absence of cheap money will bode well for stock markets, a stronger US dollar — and therefore Hong Kong dollar — puts travellers and investors in a better position, and possibly softening inflation could mean cheaper imported goods. In addition, higher rates could, ironically, prompt banks to lend just a little more against their reserves. And then there’s the new supply set to come on the market late this year. That’s not all bad news.

Jonathan Gordon, director of IP Global argues. “The long-awaited Fed rate rise will have a marginal impact on global property markets, particularly in Hong Kong where government policies attempting to cool the market have tended to exert more influence.” Nonetheless, Wong insists the Hour Branch, which influences factors closer to us, is steadfastly conservative toward the market this year. “Despite growing supply and potential buyers out there, people are more likely to just wait and see, and transactions will slow down,” he maintains. Now it’s really a waiting game.