HONG KONG: Hong Kong's government is "very concerned" about the risk of an asset bubble developing although a bubble is not apparent yet, Financial Secretary John Tsang told legislators on Monday, referring to a surge in the city's property prices this year.
Residential property prices have jumped 30% this year, and price gains for luxury property have topped 40%, as the city has drawn massive capital inflows -- amounting to a record $73 billion (RM 247.7 billion) between October last year and Nov 13, 2009 -- with foreign investors attracted by its low interest rates. Wealthy mainland Chinese have also been snapping up luxury Hong Kong apartments.
Tsang said that the financial system was sound and the city could cope with capital inflows and outflows, but echoed Chief Executive Donald Tsang and central bank chief Norman Chan, who have also warned recently about the risk of an asset bubble developing.
"We are very concerned about the risk of an asset bubble," Tsang said. "The risk is there but it is not very apparent."
The Hong Kong Monetary Authority recently reduced the mortgage limit for luxury property to 60% from 70% to try and cool the market, and mortgage demand has eased from a few months ago.
A government economist told legislators that speculation in the property market was not too heated and demand mainly user-oriented, with 90% of transactions for mass-market property. Housing affordability meanwhile was above a 20-year average.
Tsang said the government would monitor the situation but did not comment on the possibility of further measures to reduce the risk of an asset bubble. -- Reuters