Flat prices in Hong Kong may fall if the currency is depegged from the US dollar, property experts say.
'The Hong Kong dollar is expected to see an upward trend if it is depegged. And that will hit demand for assets,' said Shih Wing-ching, founder of the Centaline Property Agency.
The Hong Kong dollar has been pegged at HK$7.80 to the US dollar since 1983, depriving the Hong Kong government of monetary policy flexibility to counter cyclical economic movements and giving it little room to ease surges in asset prices. This has prompted calls for the local currency to be depegged, which the government has always resisted.
'Buying desire in the Hong Kong property market is strong partly because our currency, due to the peg, is weakening against other currencies such as the yuan. Buyers opt for property assets, which are believed to be more reliable,' Shih said.
'Now, as Hong Kong's economy is better than that of the US, its dollar will shoot up once it is depegged from the US currency. That will harm investment demand for properties.
'The nominal values of properties will drop.'