HK property prices rebound to new highs - will deposit ratios be increased again?

Despite the high deposit ratios imposed by the HKMA for propety loans in Hong Kong, property prices in Hong Kong appear to be starting a march towards new highs.

With borrowing rates so low, rental prices ever increasing, and asset prices in Asia rising, Hong Kong residents seem to be finding property to be an attractive investment, and one which will benefit them as asset prices across the region rise.

In a good article about Hong Kong property prices http://www.chinadailyapac.com/article/hkma-worries-over-renewed-property-market-asset-bubble and an eventual asset bubble, Chinadaily published the following points:

Local home prices have already advanced more than 5 percent in the last month.

The Centa-City Leading Index (CCL), an index used to gauge the local home market’s price trend, rose for the fourth consecutive weeks for the first time in 52-week that pushed the CCL to a 24-week high. The 99.17 reading represented a cumulative surge of 5.07 percent of local home prices in the last month.

“The current price hike reflects the property market is dominated by home buyers who bought houses for residential use. I predict the CCL will rise to 100 in early April, reflecting the local property market’s buoyancy,” Centaline Property Agency Research Director Wong Leung Sing predicted.

“The low interest environment in Hong Kong is pushing more local residents to buy properties for the preservation of their purchasing power said HKMA Chief Executive Norman Chan.

The HKMA has already launched four rounds of prudential risk measures since 2010, asking local banks to raise the down-payment level for home buyers.

Chan, in the Legislative Council Financial Affairs Panel meeting held in early March, cautioned that the city’s property transaction volumes and values picked up again in February.

“Although all these measures have been unveiled, the asset bubble risk in the local home market is still looming, highlighting the challenging local property market environment,” Chan added.

“My mandate is to safeguard the stability of the local banking system so that I will ask local banks to adopt the most stringent standards in underwriting mortgage loan applications. That is to say, local banks should only lend out the mortgage loans to those who can repay,” Chan stressed.

I believe prices will keep rising this year. For reasons that I outlined in an article How will Hong Kong loan deposit ratios affect prices I believe that prices are also well poised to rise long term, due to the policies being adopted now.