Economy

HK increasing land supply to avoid bubble

By Polly Hui (China Daily)
Updated: 2010-08-14 10:06
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HONG KONG - The Special Administrative Region's government said on Friday it will further increase land supply and tighten mortgage lending to avoid a property bubble, warning that prices of some flats are approaching historic highs.

John Tsang, the city's financial secretary, said prices in June were 8 percent up from the end of 2009, despite a series of measures the government introduced in April to cool the overheating market.

"A large amount of hot money has flown into Hong Kong's financial system. Flat prices of some popular housing developments are fast approaching historic highs," he told a news conference.

"There is an increased risk of a property bubble forming because interest rates are expected to continue to be very low for some time to come," he said.

Tsang said the government would auction three sites on its latest application list in the remainder of the fiscal year ending March 2011, regardless of whether developers tabled an offer. Two of these three sites would be auctioned in September.

Under Hong Kong's application list system, a land auction is triggered only when a developer offers at least 80 percent of the government's minimum price for a lot on the list.

Tsang added that the government would also convert some industrial sites into residential sites.

To curb speculation in the luxury market, the government will raise cancellation fees to 10 percent of buyers' deposits from 5 percent, Tsang said.

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It will also ban the resale of unfinished new homes before transactions are completed.

Norman Chan, chief executive of the Hong Kong Monetary Authority, the city's de facto central bank, warned property buyers that current interest rates are "extremely low, extremely abnormal."

"This can't last forever," he told a separate briefing.

Chan also warned banks that the credit risks they faced in residential mortgages were rising and unveiled measures to help them cope.

Agence France-Presse