Hong Kong property

Hong Kong property bubble tipping point yet to be reached: HKU professor

PUBLISHED : Monday, 21 January, 2013, 12:00am
UPDATED : Monday, 21 January, 2013, 4:59am


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While the government has warned of a property bubble, a professor of real estate says a tipping point for it to burst has yet to be reached.

Professor Chau Kwong-wing, of the University of Hong Kong's department of real estate and construction, said a comparison between current rental returns and long-term bonds' interest rates showed property prices were unlikely to slump.

"According to past experiences, property prices slide when the rate of rental returns drops 3 to 4 percentage points below bond interest rates," Chau told a forum organised by Caritas on addressing middle-class housing problems yesterday.

Presently the rate of rental returns - just below 4 per cent - is still higher than long-term bonds with interest rates of less than 2 per cent, he said.

Ben Bernanke, chairman of the US Federal Reserve, has recently announced that future interest rate rises would be directly linked to the unemployment rate in the United States.

On his blog yesterday, Hong Kong Financial Secretary John Tsang Chun-wah wrote Bernanke's comment indicated a rate rise in the US was possible before 2015.

Even if interest rates doubled, the difference between bond and rental returns would remain within a safe range, Chau said, meaning a drastic fall would not be immediate. Still, people should take possible increases into consideration when making mortgage deals, he said.

He made the comment after housing minister Dr Anthony Cheung Bing-leung on Saturday urged Hongkongers not to rush to buy flats in a panic. Cheung moved to reassure the public there would be a stable supply of flats given the Housing Society's Greenview Villa project in Tsing Yi and the authority's revised Home Ownership Scheme (HOS), which received an overwhelming response.

Home prices rose and demand surged following Chief Executive Leung Chun-ying's policy address last Wednesday, which some criticised as failing to promote policies to increase short-term housing supply.

Dr Lau Kwok-yu, City University's associate professor of the department of public and social administration, suggested the government allow those who live in subdivided flats to temporarily live in public housing estates awaiting redevelopment.

After authorities took control of old estates, the buildings were usually left vacant for a year before demolition, he said. They could be used as a short-term home for those in terrible living conditions and for those awaiting public housing, he said.

The government could also consider converting car parks and closed school sites into residential use, Dr Andy Kwan Cheuk-chiu, a member of the Long Term Housing Strategy Steering Committee, said in the forum.