The IMF yesterday said that Hong Kong property prices are set to see adjustments after years of growth.
The territory’s housing market has become one of the most expensive in the world — prices have more than doubled since 2008 — due to an influx of capital from mainland China and record low interest rates thanks to US quantitative easing.
Housing affordability has become a thorny issue for the Hong Kong government, with officials forced to introduce a series of measures to curb rising prices. However, an expected US tapering of monetary stimulus and an interest rate hike are set to bring down prices, the IMF said.
“Some adjustments are necessary,” Rhee Chang-yong, IMF’s Asia and Pacific Department director, told a press conference in Hong Kong yesterday as the international lender released its latest regional economic outlook.
“As interest rates go up because of tapering, it is one issue [the] Hong Kong government needs to focus on,” he said. “Borrowing costs will increase. It definitely will have an impact on real estate.”
Since 2010, authorities have implemented several measures to curb rising property prices, including an unprecedented bid to restrict the number of non-local home-buyers, with a 15 percent property tax on foreign investors.
Rhee said the territory’s government can consider weakening some of the measures when prices start to fall in a more significant manner in order to achieve a “soft landing.”
The recommendations came as the IMF said it expected Hong Kong’s GDP to grow by 3.7 percent this year, before edging up to 3.8 percent next year.