All the signs point to a sharp correction in property market
At last week's meeting of the Pacific Basin Economic Council, former Hongkong and Shanghai Banking Corp chairman David Eldon worried over Hong Kong's future. At the end of last month, American magazine BusinessWeek came out with a cover story proclaiming 'Hong Kong: It's back!'.
Judging by BusinessWeek's past record, said Mr Eldon, that was a sure-fire signal a downturn was just around the corner.
It is beginning to looks as if Mr Eldon was right and that BusinessWeek has once again lived up to its unwitting reputation of being a late-cycle prophet - at least as far as Hong Kong's property market goes.
With other banks expected to follow Bank of China, which over the weekend raised its effective mortgage rate by another 0.25 percentage point, analysts are forecasting a shake-out that will drive speculators from the market.
The result, according to Merrill Lynch property analyst Clifford Lam, is likely to be a correction that drives residential property prices down by as much as 25 per cent over the next year or so.
Not everyone is so bearish, but even those with more moderate views believe prices at the luxury end of the market are likely to dip by 10 per cent or more over the coming months as speculative buyers are sent packing.
The signs are already there. In a desperate attempt to bump up sales, Cheung Kong (Holdings) is asking buyers in its newest development for an initial deposit of just 5 per cent. As many as 400 flats out of 1,057 in Sun Hung Kai Properties' Arch in West Kowloon, launched in April, are already for sale on the secondary market as buyers try to resell their properties for a fast buck rather than shoulder higher interest rates.