The International Monetary Fund (IMF) said Hong Kong property prices are set to see adjustments following years of boom.
The city’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 the mainland 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.
But an expected US tapering and an interest rate hike were set to bring down prices, the IMF said.
“Some adjustments are necessary,” Rhee Chang-Yong, IMF’s director of Asia and Pacific Department, 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 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 homebuyers with a 15% property tax on foreign investors.
Rhee said the Hong Kong government could consider weakening some of the measures when prices started to fall in a more significant manner in order to achieve a “soft landing”.
The recommendations came as the IMF expected the city’s gross domestic product (GDP) to grow by 3.7% this year, before edging up to 3.8% next year.
In general, the IMF projects Asia’s growth to remain steady at 5.4% this year, compared with 5.2% last year. It could further improve to 5.5% in the next year, driven by demand, the IMF said.
