The government is trying to better assess and understand how the flow of money in and out of Hong Kong affects asset prices, although there is little evidence of prices surging out of control, the chief executive says.
Answering questions in the Legislative Council yesterday, Donald Tsang Yam-kuen sought to allay growing fears of an asset bubble, with price increases in stocks and property that do not appear justified by improvements in economic fundamentals.
'With the property market, we are particularly careful and vigilant because this is a sensitive issue. We have to see whether property prices are surging, especially those properties in relation to the middle-income group. But at the moment, we don't see any obvious signs of a bubble,' Tsang said.
'Of course, I'm not ruling out the fact that some are actually not able to buy properties or ... the properties they would like to have. So there is a need for more communication and more studies,' he said. 'We know that, among the general public, most are able to afford a home. For those who could not, could we adjust the policies in any way to help them? We need to do more work in this respect.'
Property bubbles are difficult to detect and even harder to tackle. After the asset bubble burst in 1997, many investors and households were financially scarred, and the government has been closely watching for signs of any repeat. With real estate often being the major store of personal wealth for people in Hong Kong, the government is usually careful about influencing or interfering in the property market.
There is also a long-standing criticism that the government seeks to maintain high land and property prices that support property developers and exacerbate the wealth gap.
With interest rates in the US and Europe almost at zero, money has flooded into Asian markets, mostly in stocks and property, driving up prices.
Tsang said about HK$600 billion had flowed into Hong Kong since global financial markets collapsed 16 months ago. Some HK$400 billion was invested in equities, mainly in new companies listing on the stock market.
Despite the flood of liquidity, lenders do not appear to have increased their lines of credit. For every dollar in bank deposits, only 70 cents were loaned out in November, down from 84 cents in August 2008, Tsang said.