The latest measures implemented by the Hong Kong government to curb property prices may suggest that developers are ceding control over to Beijing, said Todd Martin, Asian strategist at Societe Generale.
“The really important thing about these new property restrictions is their symbolic nature because what it means now is that Hong Kong property developers have lost their control over Hong Kong,” Mr. Martin said.
“Li Ka-Shing is no longer the most powerful man in Hong Kong, it’s (Chinese Premier) Wen Jiabao. Beijing is now running the show,” he said, but noted that the new measures will give long-term benefits, as the property market would focus more on yield rather than appreciation.
Last week, Hong Kong imposed additional stamp duties and raised down payment for home loans to cool the property market which saw a rise of more than 50 percent since January last year.
The new measures came amid growing fears of asset bubbles in Asia, with Mr. Martin saying that the reluctance of Asian countries, including China to use foreign exchange to limit inflation is creating more bust cycles and short-term boom. “China has jumped on demonising capital inflows. It’s like blaming capital inflows for inflation problems when it’s the flip side – your currency is so weak that you’re creating this inflationary environment,” he said.
“The market can smell and sense an underpriced currency and (the capital) is not necessarily foreign money, it could be domestic money coming back.”