Hong Kong : The risk of a property bubble remained in Hong Kong amid liquidity and low interest rates, Norman Chan, chief executive of the Hong Kong Monetary Authority, said yesterday.
"In the scenario of extremely low interest rates, ample funds and positive economic trends, the risk of formation of asset bubbles hasn't diminished," Chan said in a legislative session. The HKMA is the city's de facto central bank.
Home prices in Hong Kong have risen 9.3 per cent this year, adding to 2009's 29 per cent gain, as record-low interest rates, lagging supply growth and buying from rich mainland Chinese fuel demand.
To assuage concerns that housing is no longer affordable for ordinary citizens, the government has pledged to increase land supply and regulate developers' sales tactics to cool the property market.
The mortgages that home owners will have to pay in proportion to their income, will rise to 60 per cent from the current 47 percent if interest on the loans rises by 300 basis points, Chan said. This applies to so-called mass market homes that are smaller than 100 square metres (1,076 square feet) each.
The increase will be bigger for luxury homes, to 92 per cent from the current 70 per cent, he said. Luxury homes are those bigger than 100 square metres. One basis point is 0.01 percentage point.
Home prices
An index of existing home prices rose 0.3 perc ent as of May 16 from the preceding week, Centaline Property Agency Ltd., one of Hong Kong's biggest, said in an e-mail report.
The increase came mainly from higher prices in the Kowloon district, as values on Hong Kong Island and in the New Territories dropped, the report said. Home prices rose 5.3 per cent in the first quarter from the previous three months, Chan said on Wednesday.
