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  • Aug 24, 2014
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FINANCE

Hong Kong property cooling measures won’t ease ‘until US interest rates rise’

Financial services chief says Fed interest rate hikes a big factor in how long property market cooling measures such as 15pc levy remain

PUBLISHED : Monday, 19 May, 2014, 11:43pm
UPDATED : Tuesday, 20 May, 2014, 7:16am

Investors should not expect any easing of measures to cool the property market until a rise in US interest rates.

That was the message yesterday from Secretary for Financial Services and the Treasury Chan Ka-keung.

He described the stamp duties designed to hold back real estate speculation as "extraordinary measures for extraordinary times".

And he said: "Clearly, this is not a time for unwinding."

I don’t want to say this single factor will trigger the unwinding
CHAN KA-KEUNG

When pushed on the question of whether the end of quantitative easing and a hike in interest rates by the US Federal Reserve would be the earliest point at which Hong Kong would roll back stamp duties designed to dampen rampant real estate speculation, he added: "I don't want to say this single factor will trigger the unwinding, but clearly that will be one of the major factors."

Chan was speaking during a wide-ranging, hour-long interview with the South China Morning Post in the government offices complex at Tamar, in which he described how the administration had attempted to cool demand in the property market.

The government imposed three measures in stages in 2012 and 2013 to counter the impact of super-easy monetary policy in the US and elsewhere that led to cash, often from abroad, being injected into the city's property market after the cost of funding in US dollars - to which Hong Kong's currency is pegged - fell to zero in 2009.

Average home prices across the city have risen 125 per cent since then, according to government data, pushing them far out of the reach of average Hongkongers, who complain that salaries have remained largely static in comparison.

The cooling measures include a 15 per cent levy on non-permanent resident and corporate property buyers, an expansion of stamp duties on quick resales of property and a doubling of duties on all properties costing more than HK$2 million, with exemptions for permanent residents who are first-time buyers or sell their only home to buy another.

They have held prices broadly in check, but there is little evidence of a meaningful retreat, despite developers saying they have been forced into giving discounts in the face of softening demand.

"The low-interest-rate environment is still here, so we've got to be very careful," Chan insisted.

Economists widely believe that US interest rates will not rise before June or July next year, with Fed policymakers still nurturing a delicate recovery from the massive downturn that followed the 2008-09 global financial crisis.

Meanwhile, investors awaiting the arrival of the Hong Kong-Shanghai "through train" scheme to allow seamless stock trading access between the two financial centres should expect it to begin on schedule in late autumn.

Chan was confident in sticking to the likely mid-October start date for the scheme, despite a number of key issues remaining unresolved.

They include the availability of investor access to sufficient quantities of yuan, regulatory enforcement and quota limits.

"We're still early, but we are working towards that deadline," Chan said. He refused to speculate on when the scheme might cover other asset classes, though he expressed interest in the logic of commodities given Hong Kong Exchanges and Clearing's ownership of the London Metal Exchange.

Chan said the "through train" was indicative of the role Hong Kong would likely play in facilitating financial reform on the mainland.

"This particular mechanism for opening up is quite easy to implement for China," Chan said. "You don't have to do a lot of regulatory overhaul internally, because you just open up and link to Hong Kong.

"That is fundamental."

 

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This article is now closed to comments

Paweł Honisch
Friday, July 8th, 2011
"Plan your food supplies now. Grow and buy seeds that will keep you alive. Buy silver coins or gold, so that you can buy what is necessary."
****www.thewarningsecondcoming.com/eternal-father-will-prevent-new-world-order-from-final-persecution-of-his-children/
virokick
CY Leung actually is against property tycoons and the tycoons (LKS )are against him- even threatened to pull out of HK claiming CY Leung is hurting free market principles. The CE actually has a noble plan- 450,000 units ,but he just doesn't have the power and support; ie to speed up land approvals ,Due to our political structure.
Dai Muff
Restaurant premises for rent on Elgin Street. A cool half million a month. Don't tell me this market is cooled. We're not suckers.
pragmatist
a step forward might be to tax the expats and their firms for getting housing allowances. this is skewing the market.
pragmatist
ok - so why are the govt servants not coming up with better policies? They are supposed to be policy makers, not reports and apologists! Too much to expect?
XYZ
If we had real leadership in government, the administration and its top officials would be articulating an ambitious positive vision for a future Hong Kong which would include larger, more affordable dwellings for the average citizen and they would be crafting and promoting policies to achieve the same.
.
The cramped thinking by the likes of Mr. Chan is dismaying, dispiriting and, alas, completely unsurprising.
virokick
Until there is concrete evidence to supply 450,000 units and solve the huge housing deficit - restricting ownership is needed. Multiple property ownership should be heavily taxed - forcing rent seekers and property hoarders to put them on market.
HK-Explorer
SCMP already said their math was wrong on the 250,000 empty flats and was indeed far lower.
XYZ
That's all the news to be had from an hour-long interview? It must have been a bore-fest.
jayb
given our 0% to 1% growth, the Fed will continue print money for at least a few more years (if not decades). if this thesis stands that HKG property markets tie to US interest rate, then HKG property will continue going up in pricing. good luck and good night.

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