Financial Secretary Paul Chan warned on Thursday that the interest rate hike in the US will likely slow down external demand and hit Hong Kong’s exports, but said he doesn’t think it will lead to any sharp drop in the city’s property market.

He was speaking shortly after the US Federal Reserve lifted its policy rate by 75 basis points for the third time, to a 3.00-3.25 percent range.

“External demand would suffer because of the high interest rate environment. Consequently, our export will suffer. In fact, the second-quarter export of Hong Kong has dropped by more than eight percent,” he said.

Chan said the interest rate is just one of the factors that affect the property market.

“We have to look at also the demand supply situation, the employment situation, the repayment capability of homeowners, the financial position of developers and individual households,” he said.

“So, taking all these into account, I don’t think there will be a risk of a sharp adjustment in the property market.”

Chan also warned that Hong Kong’s economy will very likely record a contraction this year in light of the impact of previous Covid outbreaks.

Meanwhile, the chief executive of the Hong Kong Monetary Authority, Eddie Yue, said local banks will very likely raise deposit and lending rates following the Fed move.

Yue said people should think carefully when buying property and taking out mortgages.

“The Fed has already raised interest rates multiple times and the market expects that it will continue to do so in the remaining meetings this year. Against this backdrop, banks in Hong Kong will very likely raise the deposit and lending interest rates, including the best lending rates,” he said.

While Yue described the external environment as highly volatile, he said Hong Kong's monetary and financial markets remain stable.