Sharp Drop in HIBOR Unlikely to Save Hong Kong’s Real Estate Market Riddled With Structural Challenges: Experts

Hong Kong’s lure as an international financial center has declined, and Western capital is moving away from Hong Kong, Veteran banker Victor Ng Ming-tak said.

Highrises in Hong Kong. Dale DE LA REY/AFP

The one-month Hong Kong Interbank Offered Rate (HIBOR), which affects mortgage rates, hit a low of 0.59 percent on May 23, falling below 1 percent for the first time in nearly three years.

The rate change triggered discussion on whether Hong Kong housing prices could bottom out and rebound after having fallen nearly 30 percent from their peak over the past few years, as it will reduce mortgage interest rates, easing pressure on homeowners, which could lure funds to return to the local property market.

Shih Wing-ching, chairperson of Hong Kong real estate agency Centaline Group, recently told local media that the agency expects the property market to bottom out and stabilize this year.

Investment bank Goldman Sachs predicts that the decline in HIBOR will help increase residential property prices and reduce borrowing costs for developers. It has raised its house price forecasts for the city in 2026 and 2027 to 5 percent and 6 percent, respectively. The bank added that it expects it will take about 20 months to clear the current inventory in the private market of 28,000 unsold existing homes, and about 10 months to reach medium-term inventory levels.

But other analysts believe that the decline in HIBOR will only be a short-term technical phenomenon, as the Hong Kong property market is still facing structural challenges that mean it is unlikely to benefit from the low-interest rate environment.

Veteran banker Victor Ng Ming-tak refuted Shih’s optimistic view on the “Chaser News” program, believing that the sharp drop in HIBOR is more likely a short-term phenomenon under the current trade war. It is led by shippers rushing to focus on settling U.S. dollars and exchanging Hong Kong dollars before the Aug. 12 tariff negotiation deadline. This has seen excess funds injected into the banking system and pushing down HIBOR.

But Ng said that this does not reflect increased demand for borrowing or investment. He also pointed out that it is no longer the case of “Hong Kong people administering Hong Kong and enjoying a high degree of autonomy.”

Hong Kong’s attractiveness as an international financial center has declined, and Western capital is moving away from Hong Kong, he said. He believes that the 30 percent drop in housing prices is far from the bottom and that the current situation is a structural adjustment rather than a cyclical fluctuation.

Foreign Capital Withdrawal and a Stagnant Economy

The Hong Kong property market is facing pressure from all sides.

On May 21, Hong Kong real estate giant New World Development Co. Ltd. sought to refinance a loan of HK$87.5 billion (about $11.2 billion). As one of the big four traditional real estate developers in Hong Kong, if New World defaults, it may have an impact on investor confidence and the bank’s real estate loan portfolio.

The company’s revenue has declined for four consecutive years. In 2024, it recorded its first net loss in 20 years. In February 2025, it reported another net loss of HK$6.6 billion ($852 million). Its total debt reached HK$146 billion ($18.7 billion), and its cash reserves were only HK$22 billion ($2.8 billion).

Local property tycoons such as Jacinto Tong, CEO of Gale Well Group Ltd., and “Magnetic Tape King” Chan Ping-chi have successively sold properties to repay their debts, reflecting that real estate investors are facing financial pressure.

Weaknesses in the retail and job markets further exacerbated housing market challenges. In 2025, the full closure of the Ocean Empire Food Shop chain led to about 100 employees being owed unpaid wages totaling about HK$15 million ($1.9 million). Other notable examples of closures include UNIQLO’s Tsuen Wan store and Eggslut’s Causeway Bay store after about two years of operation.

Hang Seng Bank also recently announced layoffs, including about 1 percent of its core employees. Senior hedge fund manager Edward Chin wrote in the Chinese language edition of The Epoch Times that bank employees are “large negative asset holders” and that “a credit crisis caused by layoffs may trigger the next wave of shocks in the property market.”

Hong Kong’s taxi trade is also facing a downturn. As of May 19, the urban taxi license market value has fallen to HK$2.18 million ($280,000), a drop of nearly 70 percent from the high of HK$7.23 million ($930,000) in 2013.

Financial expert Simon Lee said in his “Zhen Talk” program that Hong Kong’s falling house prices leading to negative assets is not a problem itself; the fundamental problem lies in the city’s deteriorating economic environment. The rising unemployment rate has made it difficult for homeowners to pay their mortgages, and some people have to rent out their properties at low prices or borrow money to get through the tough times, he said.

If the economic downturn continues, the financial system will be impacted, he added.

Greater Bay Area

As Hong Kong’s “one country, two systems” advantage continues to erode, housing prices in Shenzhen, Guangzhou, and other places are also putting pressure on Hong Kong’s housing prices.

Chinese-language Epoch Times columnist Cai Zi pointed out that the traditional advantage of Hong Kong’s “land being as valuable as gold” is gradually disappearing. As Hong Kong’s economy and policies are increasingly aligned with those of mainland China, in theory, the prices of financial assets will gradually converge with those of the mainland, he wrote.

Coupled with the fact that Hong Kong’s birth rate has fallen to a historic low, retired Hong Kong people are moving north into the mainland to buy property or settle down to cut living costs, further weakening Hong Kong’s housing demand, he said.

Even if the Hong Kong government is advocating the scheme of “attracting talents,” professionals who come to Hong Kong to work and earn money for a few years will most likely return home to buy property.

“The same amount of money can easily buy two or three units when they return home,” Cai wrote.