Hong Kong’s top financial officials on Monday issued their strongest warning yet to homebuyers about escalating risks in the “exuberant” market, revealing that prices were now nearly 90 per cent above their peak in 1997. Principal government economist Helen Chan told a Legislative Council meeting that if currently low interest rates went back to a “normal level” – which would mean a 3 per cent rise – home owners would have to set aside 86 per cent of their monthly income for mortgage payments. Financial Secretary Paul Chan Mo-po , warning that the chance of a US interest rate rise this month was 100 per cent, noted that mortgage payments were already taking up 66 per cent of home owners’ income and the ratio could increase further. Hong Kong’s property bubble is a long way from bursting Chan revealed that property prices in the city surged 6.5 per cent in the first four months of this year, with a 2 per cent increase in April alone. “The risk in the property market is very high; sentiment in the property market is very exuberant,” Chan said. Sentiment in the property market is very exuberant Paul Chan Mo-po, finance minister At the same time, he gave an assurance that the city’s financial and banking systems were stronger than in 1998 when the bubble burst, or during the global financial crisis in 2008. A correction in the property market would not cause the kind of impact seen back then, he said. Residential property sales have been drawing thousands of home buyers, in scenes reminiscent of the days in 1997 before the crash, sparking concern in the highest levels of government. Ocean Pride, a new residential project in Tsuen Wan by Cheung Kong Property, owned by Hong Kong’s richest man Li Ka-shing, has sold all 842 flats put out for sale over the past few weeks for almost HK$9 billion. The developer will release more flats today at a price of about HK$25,000 per sq ft. Late last month, Hong Kong Monetary Authority chief Norman Chan Tak-lam warned that home prices were too high for most Hongkongers, yet many were lining up to buy flats in the belief that prices would only rise. Hong Kong homebuyers undeterred by mortgage rate rises in seeking Kai Tak flats The financial secretary told lawmakers that the under-supply situation in the property market was gradually being eased, with 96,000 flats slated for the market over the next three to four years, 70 per cent of them small or medium-sized flats. Chan warned of an even bigger risk ahead, predicting that if interest rates were to rise 3 per cent when the US returned to a “normal” environment, mortgage payments would take up a whopping 86 per cent of income. Some lawmakers remained unimpressed by the government’s moves to tackle soaring home prices and the current shortage driving demand. Consider the ‘lag effect’, CY Leung says as he urges patience for Hong Kong housing prices to cool Pro-establishment legislator Jeffrey Lam Kin-fung questioned whether cooling measures so far were working at all, as home prices showed no sign of coming down. He suggested ramping up land supply by using brownfield sites and some parts of protected country parks . Another pro-establishment stalwart, Holden Chow Ho-ding, was concerned that the cooling measures, including tighter mortgage arrangements, were also making it difficult for local middle-class buyers to acquire property as they struggled to get a sizeable mortgage. Is Hong Kong’s property market heading for its biggest crash since 1997? Dismissing chances of relaxing the cooling measures, the finance chief said government help for homebuyers now would only “cause harm” and further heat up the market. Chan painted a positive picture of the economy as a whole, reporting first-quarter gross domestic product growth of 4.3 per cent, on the back of strong external markets. He also said the government was seeking to boost trade with other countries to lessen the impact of protectionism under US President Donald Trump .