Hong Kong property bubble risk remains: Financial Secretary

Property prices here grew at a slower pace and sales fell in the second quarter as global stock markets weakened, but the risk of a bubble will remain as long as interest rates stay low, the city’s Financial Secretary warned yesterday.

Mr John Tsang told legislators that market sentiment had moderated in the past two months after a sharp rebound in February. In May, prices grew by less than 1 per cent and registered transactions fell by 30 per cent to 5,890 last month. Mr Tsang said the direction of the real estate sector was still unclear.

“The property market is under the influence of the weak external economic environment and ultra-low interest rates and it’s difficult to predict its future direction,” he said. “But as long as the low-interest rate regime remains unchanged, the risk of the property bubble remains.”

Low rates and a flood of buyers from mainland China have pushed up Hong Kong real estate prices in recent years, fuelling broader inflationary pressures. Home prices soared 94 per cent over the last five years to the end of last year, according to brokerage Knight Frank.

Responding to widespread local anger at being priced out of the market, new Chief Executive Leung Chun Ying has proposed some countermeasures, including selling land for developments that would be restricted to residents only.

At the same time, the risk of a sharp correction in the city’s property market has grown as Europe’s debt crisis deepens and as the global economy sputters, reducing demand for goods from China and Hong Kong.

Source : Today – 11 Jul 2012

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