Words: Ashley Rigg
Published: 26th October 2009
Hong Kong acts to curb property boom
Barely a week after a developer in Hong Kong set the world price record
for the sale of an apartment; the authorities have introduced new legislation to dampen demand at the top-end of the market.
The Hong Kong Monetary Authority, the city's de facto central bank have increased the down payment required to purchase property worth $HK20 million ($2.8 million) or more from 30% to 40% of the purchase price.
While property prices in much of the world continue to fall, prices in Hong Kong have rocketed this year due in part to low interest rates and a wave of liquidity from mainland China, where Beijing last year unleashed a four trillion yuan ($636 billion) stimulus. Developers on the island say that mainland Chinese customers now account for as much as 40 per cent of new home sales.
The government has been criticized by many commentators for artificially inflating prices by keeping strict control of land on the island. The government owns all the land in Hong Kong according to the FT, and releases plots for auction from a pre-approved “application list” only after a developer’s offer triggers a closely guarded reserve price.
The Hong Kong Monetary Authority deputy chief executive Y.K. Choi denies there are structural issues with the market. "There are no real problems in the overall property market, but the luxury residential sector is worrying" he says.
Hong Kong has managed to sidestep the troubles affecting the UK and US mortgage markets, thanks to a 30 per cent down-payment requirement on all property that has been in place since 1991.
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