As mid-July has begun and the weather is still unpredictable, transaction activity at the top ten housing estates has stayed weak, with fewer than ten deals recorded each weekend for six consecutive weeks. Agents continue to attribute the sluggish market to rainy weather, while repeatedly insisting that property prices will rise by another 10% before the end of the year. At the same time, Sun Hung Kai Properties has released the second price list for its new project, The Garden Residency in Kam Tin North, Yuen Long, offering a 6% discount. This marks a rare case in more than a year of a developer cutting prices during the first launch phase of a new project.
Since June, the property market has been largely on pause. While agents have continued to rely on market hype to attract buyers, well-known short-term speculators and financial scholars have also turned more bearish. Their reasoning is broadly similar. First, the central government has curbed the private diversion of funds away from Hong Kong, which has weakened investment momentum. Second, the likelihood of a Federal Reserve interest rate hike in the fourth quarter has increased. As banks compete for deposits, both Hong Kong dollar and US dollar interest rates have risen sharply. The three-month US dollar fixed deposit rate has climbed to 3.55%, further reducing the appeal of buying property for rental income.
After a month of market stagnation, Sun Hung Kai Properties has responded to the latest market conditions by lowering prices, 
signaling that inventory reduction keeps its top priority. Other developers are likely to take note and follow with discounted launches of their own. As a result, news of new projects being offered at reduced prices is expected to become more common over the next one to two months.
The situation is different for existing homeowners. After enjoying a year of rising prices, many are finding it difficult to accept that the fundamentals of the property market have changed. As a result, asking prices has been holding well above what buyers are willing to pay, further contributing to the recent decline in transactions at existing housing estates. However, if developers continue to cut prices over the next one to two months, existing homeowners will eventually be forced to follow suit. This could lead to a significant decline in the existing home price indexes in the fourth quarter.
