US rate cut 'should spark demand for new property'
The chairman of Professional Property Services Group, Nicholas Brooke, says he thinks an interest rate cut in the US will spark demand for residential property purchases here, although developers will have to be competitive on pricing.  "I think we have to be honest. There's a greater degree of optimism now with the news about likely interest rate cuts by the Fed so that's feeding through into the market. I think if you ask me about market sentiment, I would say the market remains cautious but there is a greater degree of optimism," he said on RTHK's Hong Kong Today programme. "And the reality is that after 18 months of treading water, if you like, there's significant latent demand from both first-time buyers and upgraders so the demand is there I'm sure." Last Friday Federal Reserve chairman Jerome Powell said it was time for the US to start cutting interest rates and with the Hong Kong dollar's peg to the US dollar, that should mean lower borrowing costs here. Brooke said there was an estimated surplus of 20,000 to 22,000 unsold new private units, which was equivalent to at least half a year's supply. He said 7,000 to 10,000 could be sold by the end of the year and the remainder could probably be sold by the middle of next year. But he said this would mean developers would have to be competitive on pricing for at least the next 12 months or so to work through this inventory. Brooke also said he didn't expect private residential rents to fall in the near term, even though he saw pent-up demand to buy new flats. "I actually see rents going up. We've got the talent scheme and there's quite significant demand from the student community for rental accommodation. We're short of private rental stock in Hong Kong. If anything, I think rents may well rise in the short and medium term because there is demand, and it's real demand," he said. However, Brooke said the situation for commercial rents was very poor with prime office buildings in top locations in some cases being half empty. "Well, the office market is in some disarray from a vacancy and occupancy perspective," he said. "There are two major buildings in Central, which are probably 40-to-50 percent let, struggling to find new tenants."  Brooke said the commercial market was very soft generally and that was a function of the economy at large.