With a limited supply of new residential units and low interest rates, property prices in Hong Kong could fall sharply, according to the International Monetary Fund (IMF).
“The property sector is the main source of domestic economic risk,” said the organisation, although it maintained that the odds of a slump that pose major consequences are “fairly low in the near term”.
Home prices in the territory have spiked in the last four years, prompting the government to tighten mortgage lending and boost land supply.
The IMF noted that the property sector represents about 50 percent of outstanding loans for use in Hong Kong, with additional risks from the use of real estate as collateral. Moreover, economic growth could rise to about three percent next year from an expected 1.25 percent in 2012.
Average inflation could be 3.75 and 3.5 percent in 2012 and 2013 respectively, it said.
The IMF added that housing prices climbed 20 percent in 2012, “defying the general slowdown in economic activity”.
As such, it will take time to address concerns over affordability and supply of homes, said Steven Barnett, Hong Kong mission chief at the IMF. He noted that long-term it boils down to increasing supply.
Romesh Navaratnarajah, Senior Editor of PropertyGuru, wrote this story. To contact him about this or other stories email romesh@propertyguru.com.sg
Related Stories:
Ascott strengthens presence in Indonesia
More should consider Malaysia as investment destination: report
Demand for overseas property heats up in China