STOCK MARKET WATCH -- Wednesday, 12 December 2012

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20. Hong Kong at Risk of Property Price Correction, IMF Says

http://www.bloomberg.com/news/2012-12-12/hong-kong-at-risk-of-property-price-correction-imf-says.html

Hong Kong is at risk of an abrupt decline in house prices after they doubled to a record in the past four years, climbing 20 percent in 2012 even as the economy cooled, the International Monetary Fund said.

“The property sector is the main source of domestic economic risk,” the IMF said in a report on the city released today. At the same time, the odds of a slump that has major economic and financial consequences is “fairly low in the near term,” the fund said.

Hong Kong’s apartment prices have surged to become the world’s most expensive after low interest rates and limited supply fueled demand, prompting the government to tighten mortgage lending and add taxes. Since taking office in July, Chief Executive Leung Chun-ying imposed three rounds of curbs, including an extra 15 percent tax on buyers from overseas, and officials have signaled more measures are possible.

“The sharp run-up in house prices raises the risk of an abrupt correction,” the IMF said in the report. The property sector represents half of outstanding loans for use in Hong Kong, with additional risks from the use of real estate as collateral, it said.