Since the US began quantitative easing, Hong Kong home prices have doubled (see chart).
Last week, according to FT, Li Ka-shing’s Cheung Kong Holdings sold 360 individual hotel rooms in the New Territories for a cool $180m. Hong Kong regulators are now raising stamp duties and trying to restrict home loans to cool down a real estate market that has some of the most expensive apartments in the world.
“The risk of an asset bubble is increasing. If we allow the bubble to grow, in the end it will affect the macroeconomy and also the stability of the financial system. It will be very damaging to society,” said HK’s financial secretary.
Yet also last week, the Fed signalled doubts about the ongoing merits of QE. Hong Kong’s market is based on expectations that gains can continue and the dangerous perception of stability engendered by the rally. It will not take actual rate rises, only a belief that they are coming, to change that.
Source: FT, NYT