Hong Kong Finance Secretary warns of property market’s dangerous situation

21 Jun 2017

Hong Kong skyline


With the US Federal Reserve’s rate hikes increasing borrowing costs, the financial secretary of Hong Kong cautioned of the property market’s vulnerability to a correction, reported Bloomberg.

Notably, the Hong Kong Monetary Authority raised borrowing costs by 25 basis points to 1.5 percent last week, or the same amount the Fed raised its target range.

“That’s why we have to warn our people about the dangerous situation of the property market at the moment,” said Paul Chan, who was named finance secretary in January. “No one can tell how deep the adjustment will be or what is the appropriate level of adjustment.”

Nonetheless, Chan is confident that Hong Kong’s financial system can withstand any steep correction. In fact, the government is already ramping up its efforts to boost supply and ease demand.

He also noted that unlike the Asian financial crisis which slashed over two-thirds off prices, the current cycle shows no signs of a crash.

“The situation is very different from 1997.”

Notably, the property cooling measures rolled out by the government had little effect on house prices as developers submit record high bids for lands while borrowing costs remain relatively low.

The value of outstanding mortgages soared by over a third in the five years to December, and now stands at 47 percent of gross domestic product. The figure is higher by over 10 percentage points than in early 1997 prior to the bursting of the property bubble.

Proving recent predictions of property crash wrong, Hong Kong’s role as a conduit for capital into and out of China continues to be a key strength, said Chan.

“We can be a risk manager for both sides.”


This article was edited by Denise Djong.


You may also like these articles

CWG Int'l CEO slams reports of a property bubble in China

  Despite reports of a property bubble in China, SGX-listed and Chinese developer CWG International plans to accelerate its expansion domestically while also embarking on new projects in the U

Continue Reading5 Jun 2017

Rate hike to significantly affect home buyers in Hong Kong

  Hong Kong’s principal economist Helen Chan warned on Monday (5 June) that if the low interest rates at present returns to its “normal level” or increase by three percent, monthly mortg

Continue Reading6 Jun 2017

South Korea tightens housing rules amid soaring household debt

  In a bid to cool the red hot housing markets amid surging household debt, South Korea unveiled measures aimed at tightening mortgage restrictions as well as curbing speculative resale of hou

Continue Reading20 Jun 2017