Here’s how Hong Kong let the air out of its property bubble without popping it
- Steps to increase supply, tighten lending and raise borrowing rates are expected to help Hong Kong from seeing a major crash in home prices. And luck gets some credit, too
Less than two months ago, Hong Kong was named home of the world’s biggest property bubble. Now it may become known as the model for how to slowly deflate a bubble and avert a painful burst.
Signs the air is slowly seeping out of the bubble are growing:
Home prices slipped some in August and September – after a 28-month bull run that drove up prices by 45 per cent. Long queues of hungry buyers are far shorter. Even auctions of foreclosed homes are coming up short of bidders.
Meanwhile, property watchers are pretty much in agreement that the decline in home prices will be between 10 per cent and 15 per cent over the coming year. That would be a much softer landing for the city and its people than the double whammy delivered by the Asian Financial Crisis and the SARS epidemic, when prices plunged 66 per cent between October 1997 and July 2003.
Steps by Chief Executive Carrie Lam’s administration to boost housing supply and by the city’s de facto central bank to raise loan rates and order banks to tighten lending rules are helping this property market downturn not spiral into a horror show, experts say. Combined, these have contributed to the growing negative sentiment that is tamping down home prices.
To be sure, luck is playing a role this time as well.