Financial Secretary John Tsang Chun-wah yesterday warned of the risk of a property bubble, saying the price of flats had not fallen to a satisfactory level - even though there has been a sharp fall in deals in recent months.
Flat prices saw a 13 per cent year-on-year rise in the first nine months of the year, and for September alone, prices were still some 6 per cent higher than that of the 1997 peak.
Tsang was briefing legislators on Hong Kong's latest economic outlook and consulting them over February's budget at a special meeting yesterday.
'The transaction volume has greatly fallen,' he said. 'Although the prices have not yet fallen to a level ... deemed satisfactory, this can perhaps be seen as a kind of soft landing, which I think is largely not a bad thing.'
Tsang did not say whether the government would take more steps to cool the market or what price level was deemed satisfactory.
But he warned: 'It is still my worry that there could be another bubble being formed. So, we cannot be too careful.'
Tsang also adjusted the forecast for this year's economic growth to 5 per cent - the lower end of a forecast made in August of 5 to 6 per cent. The economy grew 4.3 per cent in real terms in the third quarter compared with a year ago - down from 5.3 per cent growth in the second quarter.
Wong Leung-sing, head of research at Centaline Surveyors, was surprised by Tsang's remarks, saying he might be setting a bad precedent.
'Prices are determined by market forces,' he said. 'If Tsang says he is not satisfied with the present price level, perhaps he should tell the people what the government thinks the satisfactory price should be.
'This could be bad. One day, we may see the government set an official flat price for us.'
According to Tsang, overall flat prices fell 2 per cent during the third quarter, the first quarterly decline since the end of 2008. Transactions in the third quarter fell 41 per cent compared to the preceding quarter.
The fall came after moves by the government last November to rein in rampant home-price inflation. The measures included a special stamp duty of 15 per cent of the sale price - on top of the usual 4.25 per cent stamp duty - for flats sold within six months after purchase.
The Monetary Authority also reduced the amount banks could lend to buyers of homes worth HK$12 million or more from 60 per cent to 50 per cent of the price.
According to Rating and Valuation Department figures, the number of transactions of first and second-hand flats dropped from 13,189 in November last year to 4,823 in September this year.
The total value of the transactions also fell from HK$58.83 billion in November last year to HK$22.96 billion in September this year.
To rein in property prices, New People's Party chairwoman and lawmaker Regina Ip Lau Suk-yee proposes a government levy on vacant shops to prevent owners from keeping them empty until someone is willing to pay a high rent. Accountancy sector legislator Paul Chan Mo-po has suggested a levy on both vacant shops and empty flats.