China Economic Review
Charting China’s changing economic terrain · Since 1990
Hong Kong worried about property bubble
October 25, 2009
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Hong Kong’s central bank has moved to slow a surge in luxury property prices. In theory, this would have no direct effect on the Mainland. In fact, it is reported prices are being driven by rich buyers from Mainland China.Hong Kong’s Chief Executive, Donald Tsang, warned of a potential property bubble — as one luxury flat in the city sold for a world record of $9,200 per square foot (depending on how you measure it) — and said the government could release more land for sale.
The Hong Kong Monetary Authority said it would cap the mortgage limit for luxury property at 60%, down from 70%, and limit mortgage loan values.
Norman Chan, chief executive of the Hong Kong Monetary Authority, said, "It is very difficult to detect if a bubble is there. But what we’re concerned about is, given the very sharp rise in prices in this top segment of the property market, the risk, or credit risk, to these mortgage loans to these properties has increased."
Prices have surged by 26 percent this year, and by more in the luxury segment, where Mainland Chinese are snapping up apartments. Many of them are entrepreneurs who are awash with cash and would not be deterred by the mortgage limit, analysts say. Chan acknowledged that but said there was still a portion of people needing mortgages.
Reuters reported the last property bubble in the late 1990s burst with the onset of the 1997/98 Asian financial crisis and property prices plunged 70%.