Hong Kong’s government may take more measures to curb property-price gains in the city as "risks" are rising, Financial Secretary John Tsang said.
“The current market situation is abnormal," Tsang wrote in his official blog today. "It is difficult to predict the outlook of the property market but one thing for sure is that risks are increasing continuously," he said. "We have no hesitation to increase the intensity of measures if necessary.”
Senior government officials have in the past year warned of an asset bubble in the Chinese city, where home prices have surged more than 70 percent since the start of 2009 on record low interest rates and an influx of buyers from other parts of China. Since late 2009, the government has raised minimum down payments for mortgage borrowers, increased land supply and imposed additional transaction taxes to curb real estate value.
“The government measures were not intended to bring down the property market,” Tsang said. “I am aware of some public concerns that the property market may soon enter a downward cycle and that more drastic measures may lead to a hard landing.”
Hong Kong’s "soaring" real-estate market may be at risk of a “sharp correction,” Standard & Poor’s said on June 15. The city’s Chief Executive Donald Tsang said on June 17 home prices are "quite frightening’’ as China’s growing wealth fuels increases of 2 percent a month. Tsang also said the government may introduce more measures to slow the property market.
The most recent measures, announced on June 10, include requiring borrowers whose income is primarily from outside Hong Kong to deposit an extra 10 percent when they buy properties unless they can demonstrate a “close connection” to the city.
Hong Kong’s peg to the U.S. dollar means the city follows interest rates set by the Federal Reserve, which has held its benchmark rate at a range of zero and 0.25 percent since December 2008.
Donald Tsang’s government may unveil a plan to resume the construction of government-subsidized housing, known as the Home Ownership Scheme, the Hong Kong Economic Times reported on June 18, citing people it didn’t identify.
The property market has been “volatile” since November and there are signs of “renewed exuberance” after the market cooled down in March and April, Norman Chan, the chief executive of the Hong Kong Monetary Authority, the city’s de facto central bank, said in a June 10 briefing announcing the latest measures. Chan earlier warned about the risk of a “credit-fueled property bubble.”
Home prices dropped 1.01 percent in the week ended June 12, the biggest weekly decline in six months, according to Centaline Property Agency Ltd, Hong Kong’s biggest privately held realtor. Savills Plc ranks the city as the most expensive place in the world to buy an apartment.