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US stimulus brings HK home price rises

HONG KONG: Home sales activity in Hong Kong last week fell 40% from the previous week as homeowners rushed to raise asking prices in expectation of a property boom as a result of the United States' announcement of a second round of fiscal stimulus for the economy.

An unintended side effect of the Federal Reserve's decision to pump another US$600 billion (RM1.86 trillion) into the system — the so-called quantitative easing 2, or QE2 — has been a flood of liquidity to emerging markets where economic fundamentals are relatively stronger and yields more attractive.

"Property prices continued to increase after the government's policy address in mid-October. Together with the removal of the QE2 overhang and the recent bullish sentiment in the stock market, property owners are becoming more reluctant to sell their properties at the current price levels. This is leading to a decline in secondary transaction volume," said Lee Wee Liat, regional head of property at Samsung Securities (Asia).

As a result, there were 475 preliminary purchase agreements signed at 50 housing estates during the week from Nov 1-7, down from 790 transactions at the same housing estates during Oct 25-31, according to data compiled by Ricacorp.

"The wait-and-see attitude will last for a while and I believe the market will be slowing in the next few weeks," said David Chan, a director of agent Ricacorp Properties.

The biggest fall was seen in the housing estates on Hong Kong Island, with 64 flats sold, against 130 in the previous week.

Twenty-six new homes were sold last weekend, against 11 the previous weekend. A number of new projects including the Festival City II project by Cheung Kong and the MTR Corporation will be launched soon, so the volume of new-home sales is expected to rise substantially. — South China Morning Post
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