The surge of the last 24 months in the Hong Kong real estate market appears to be coming to an end. Higher lending rates and government action has created a 38 per cent drop in property purchases in April compared to the same month last year and a 27 per cent decrease from March, reports MarketWatch.
Banned under its constitution from limiting incoming capital flow and with its currency still pegged to the weakening US dollar, the amount of money in circulation in Hong Kong has skyrocketed in recent years. This influx of capital created a veritable explosion in Hong Kong property values, rising 30 per cent in 2009 and 24 per cent in 2010, and resulting in yearly mortgage payments available from many banks at one per cent or even lower.
With the huge property value increases of the last two years, experts realized the impressive growth could not go on forever. The Hong Kong monetary authority sent out a letter last month, warning about the unsustainable nature of the flood of credit the city was experiencing.
Banking giant HSBC responded by raising mortgage rates on many customers, but not all have taken action; HSBC’s lowest offerings come in at 1.5 per cent higher than those still available from the Hong Kong interbank.
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