HK luxury home prices up, fears of bubble bursting

  October 28, 2010

Hong Kong luxury home prices have exceeded the previous peak of 1997, fuelling speculation the government may introduce further steps to prevent the housing bubble from bursting.

Prices of apartments with an area of at least 100 sqm (1,076 sq ft) are 13.8 per cent higher than in the third quarter of 1997, the Hong Kong Monetary Authority (HKMA)said in a slide presentation posted on its website on Tuesday.

Measures introduced by the government this year, including higher mortgage downpayments and increased land supply, failed to stem an almost 50 per cent surge in home prices since early last year.

The Hang Seng Property Index, which tracks the city’s seven biggest developers, climbed 11 per cent this year, outpacing a 6 per cent gain in the benchmark Hang Seng Index.

“The government must do more” to curb home prices in the near term, said Ms Nicole Wong, a Hong Kong-based analyst at CLSA Ltd.

“Things like increasing land supply have very limited impact on current price levels. The focus should be more about curbing lending.”

The HKMA on Aug 13 raised downpayment ratios on investment properties and any homes with a value of HK$12 million ($2 million) or more in a bid to contain home values.

Hong Kong home prices more than doubled from a trough in 2003 on a recovering economy, low interest rates and an influx of mainland Chinese buyers whose travel restrictions to the city have been gradually relaxed.

Prior to 2003, home values went through a six-year slump that began shortly after the Asian financial crisis hit in 1997, the height of the previous bubble.

Source : Today – 28 Oct 2010