According to real estate agents the decision by the Hong Kong Monetary Authority to cut the mortgage limit on property worth HK$21 million or more to 60% has had an immediate impact.
Hong Kong Chief Executive Donald Tsang confirmed that the government approves of the move and is ready to do its bit.
‘We do not want to see a huge property bubble developing in Hong Kong,’ he told a meeting of businessmen.
He said the government had tools available to stabilise the market but did not give details except to say any action would be motivated by a need for stability, transparency and smooth market operations.
Prices of mass market residential property have surged more than 20% this year, despite the economic downturn, while luxury property prices have soared more than 40% thanks to excess liquidity globally and an influx of cash from newly rich mainland Chinese.
Tsang, however, said that the current surge in prices exhibited far fewer signs of speculative behaviour than a previous property market bubble in 1997 which burst amid the Asian financial crisis.
HKMA Chief Executive Norman Chan said at the time that it was difficult to tell if there was a property bubble.
But the measures might not work since many mainland Chinese buyers of luxury property in the city buy with cash.
The mortgage measures might not calm the luxury sector, analysts warned.
Financial Secretary John Tsang met last week with the city’s property developers to express the government’s concern about sharply rising property prices.
Developers, however, said the government should release land at more reasonable prices, arguing that plots proposed for auction by the government in the past couple of years have been priced too high.
Before a site can be put to auction, a developer has to agree to pay 80% of the site’s recommended price which is set by the government.
