Hong Kong Is Not Worried If Home Prices Will Drop 20%, TVB Says

A 20 percent decline in Hong Kong property prices won’t “worry” the government, TVB news reported yesterday, citing an unidentified government official.

Even if property prices fall 40 percent in the long run, the government is confident that there won’t be a large amount of negative-equity cases like in 1998 and 2003, the report said.

A shortage of housing, low mortgage costs and a buying spree by mainland Chinese have led home prices to more than double since the beginning of 2009, shrugging off repeated attempts by the government to curb gains amid an outcry over affordability. Chief Executive Leung Chun-ying, who took over in July as head of the government, on Feb. 22 imposed his toughest yet property curbs by doubling the stamp duty on all property transactions higher than HK$2 million ($257,609).

Hong Kong home prices have fallen 2.3 percent since the February measures, according to an index compiled by Centaline Property Agency Ltd. Mortgage lending has declined to a “trough,” He Guangbei, chief executive officer of BOC Hong Kong (Holdings) Ltd., the city’s largest home loan lender, told reporters yesterday.

“We do not comment on reports attributed to sources,” Leo Law, a spokesman for transport and housing bureau, said by telephone today.

Extended Decline

The official’s comments underscore that the government was unlikely to withdraw its cooling measures, Macquarie Capital Securities Ltd. analysts David Ng, Raymond Liu and Jeffrey Gao, wrote in a research report today.

“This stance is needed to reinforce a growing consensus that, not only will prices drop further in the near term, but also unlikely to rebound aggressively in the medium term,” the analysts wrote.

During the city’s last property crash, real estate values tumbled 70 percent between 1998 and 2003 when confidence was damped by the Asian financial crisis, the 2000 dot-com bubble, Sept. 11 and the SARS epidemic.

The number of mortgages in negative equity -- where apartments are worth less than the balance of the owners’ loans -- peaked at the end of June 2003 when the slump ended. Home prices have more than tripled since then, according to the Centaline index.

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