Hong Kong officials have given mixed messages on housing market
Hard on the heels of turmoil in stock markets has come nervousness among borrowers about the direction of Hong Kong home prices. Investment bank UBS has joined a chorus of caution, warning that prices could tumble as much as 30 per cent from now to the end of 2017 amid weak economic growth. This is just after borrowers had a reprieve from an interest-rate rise.
In such a troubled climate, the last thing people need is mixed messages from top officials that exacerbate uncertainty. Despite UBS' warning, Chief Executive Leung Chun-ying said he had no plans to cancel measures to cool the housing market aimed at deterring speculators and outsiders. He also said he would press on with increasing land supply to reduce prices. Only two days earlier, however, Financial Secretary John Tsang Chun-wah said the government would closely monitor the market and make adjustments in measures introduced since 2012 to cool it. Meanwhile, the government expects private housing land supply in the three quarters to December to be enough to build 88 per cent of its financial year target of 19,000 new flats, putting more downward pressure on home prices.
It is good to see the government stand by a core housing pledge and not bend too easily in the wind. It is also good to see the finance chief take a prudent stance. But housing is the biggest issue in this city and it is reasonable to expect policy clarity. On the face of it, the two statements could be confusing.
Historically low interest rates have helped fuel all-time-high property prices. Tsang has reminded people in the past that prices can fall as well as rise, while rate increases could increase their mortgage burden. A rate rise remains on the cards this year, signalling the beginning of a tightening cycle that could hurt heavily committed borrowers, especially if the value of their flat were to fall. Since our currency peg to the US dollar dictates our borrowing rates, the government can do little. Leung and Tsang may just speaking on the different sides of the same coin, but they need to be seen to be on the same page.