Hong Kong’s de facto central banker, Norman Chan Tak-lam, said the countercyclical measures in place to curb excesses in the property market will be removed only when signs of a downtrend in home prices are confirmed.
Chan, chief executive of the Hong Kong Monetary Authority, said a huge gap is present between property price levels and the purchasing power of home buyers, the Hong Kong Economic Journal reported Tuesday.
He said the factors that have supported the uptrend in property prices are changing.
New factors include a potential rise in Hong Kong’s interest rates soon after the United States resumes the upward cycle in its interest rates, as well as a slowdown in the city’s economic growth.
Another key factor is that new housing supply is mounting while the appetite of mainlanders for Hong Kong properties is waning, Chan said.
He warned of risks that may arise from a reversion in the market cycle in the property sector, pointing out that transaction volumes have decreased since the stock market began to experience turbulence in the summer.
Nonetheless, Chan said, the chances are slim that Hong Kong properties will slide again into negative equity — where the market price of a property falls below the mortgage outstanding — as the loan-to-value ratio stands at 50-60 percent in general, compared with 90 percent during the previous slump in the city’s property market.
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