The latest figures show that the pace of the growth of property prices in Hong Kong has slowed, and sales fell in the second quarter as stock markets across the globe weakened. According to the city’s financial chief John Tsang however, there is still the risk of a housing bubble that will remain as long as interest rates stay low as market sentiment has moderated in the past two months after a sharp rebound in February, reported the Property Wire on Tuesday.
Prices grew by less than 1 percent in May, and registered transactions in June fell by 30 percent to just 5,890. According to the Property Wire, Tsang went on to explain how the direction of the real estate market in Hong Kong remains unclear.
‘The property marketis under the influence of the weak external economic environment and ultra low interest rates and its difficult to predict its future direction. But as long as the low interest rate regime remains unchanged, the risk of the property bubble remains,’ Tsang explained.
Real estate prices in Hong Kong have been pushed up over recent years due to low interest rates and a flood of buyers from mainland China. According to figures from Knight Frank, prices have risen by a huge 94 percent over the last five years. The Property Wire reported that a number of countermeasures have been proposed by Hong Kong’s new leader, Leung Chun-ying. These include restricting the sales of land for developments to Hong Kong residents only.
The risk of sharp corrective measures in Hong Kong’s property market has grown as the European debt crisis deepens and as the global economy struggles, reducing the global demand for goods from Hong Kong and China. For example, according to a report by Free Malaysia Today, the domestic exports for Hong Kong fell 26 percent in the period between January and April, in comparison with the same period last year. In April alone, the domestic exports fell 23.4 percent compared to April.