Hong Kong's near-term economic fortunes will depend on how the euro-zone debt crisis is resolved, Financial Secretary John Tsang Chun-wah said yesterday.
Speaking at the first meeting of the Legislative Council's financial affairs panel since the new administration took office, Tsang said that while last month's European Union summit made some progress in tackling the euro debt problem, euro-zone leaders had not increased the firepower of the European bailout fund and many details of the proposed new measures had yet to be clarified.
'I think the performance of the Hong Kong economy for the rest of the year hinges to a large extent on how the euro debt crisis will evolve,' Tsang said.
Although Hong Kong's exports had weakened in recent months, the government was maintaining its economic growth forecast of 1 to 3 per cent for the year, subject to revision, he said.
As for the property market, he said there was a lack of direction in prices. Sentiment had turned cautious in the past two months due to the worsening euro-zone crisis, but continuing very low interest rates made the market prone to bubbles.
'The government will stay alert to housing market bubble risks and, where necessary, roll out further measures without reservation to ensure the healthy and stable development of the housing market.'
The average home price rose by less than 1 per cent in May, according to provisional data. Nonetheless, prices were 10 per cent higher than six months ago, and 15 per cent above their previous peak in 1997.
The volume of home sales in April and May - about 8,300 per month - were on par with the monthly average for 1997 to 2010 of about 8,200 but 33 per cent higher than in the first three months of the year.
In June, however, the number of sale and purchase agreements for homes received by the Land Registry plunged by almost 30 per cent, month on month, to around 5,900.
Tsang said the mainland would support the city's economy.
At the same meeting, Hong Kong Monetary Authority chief executive Norman Chan Tak-lam said Hong Kong's economy would not be affected if the US decided to inject more money into the economy in another round of quantitative easing.