SPOOKED by the prospect of rising interest rates, a slowing economy and a mounting supply of new apartments, Hong Kong developers are going all out to woo buyers, offering bigger loans, longer repayment periods and even discounts for school tuition.

The aggressive sales pitches — at a time when borrowing costs are set to surge and property prices are likely to fall by 10-15 percent — could push up delinquencies and weigh on the financial sector, bankers and analysts warn.

Close to 900 new apartments were put up for sale in the past weekend, the most for more than five years.

Hong Kong is one of the most expensive property markets in the world, where a one-bedroom 650-square-foot (60-square-meter) flat on the main island costs an average of US$1.48 million.

Low interest rates, limited supply and big flows of capital from mainland buyers resulted in housing prices rising by 165 percent over a decade, prompting repeated warnings from authorities about asset bubble risks.

Hong Kong private home prices rose to another record in July, extending a 28-month run.

In a sign of cooling market, however, August prices in the secondary market fell 0.3 percent, realtor Ricacorp Properties said. Another realtor, Centaline, expects total transaction volumes in September to drop to the lowest since July 2017.

Rising interest rates could be the needle to prick any bubble.

Banks are likely to raise the benchmark prime interest rate for the first time since 2006 this week following another expected rate rise by the U.S. Federal Reserve.

“Mortgage rates can only go up and quite quickly,” said Alicia Garcia-Herrero, Natixis’ chief Asia Pacific economist.

“The rise in interest rates would have an impact on the lower end of the market, where households have resorted to loans from non-banking firms.”

(SD-Agencies)