US Fed policy affects Hong Kong property prices

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HongKongHong Kong’s property prices are expected to drop, reports China’s state newswire Xinhua, saying that prices have been affected by the US Federal Reserve’s continued tapering off of its quantitative easing (QE) policy. The slowing liquidity could jolt both local property and equity markets.

Despite the influx of mainland Chinese listings in recent years, property stocks still represent a quarter of the Hong Kong equity market, as judged by the market value of the MSCI Investable Universe Hong Kong Index.

Hong Kong may be particularly affected by US policy because of the extent to which it has gained from the quantitative easing. The longstanding currency peg to the US dollar means that Hong Kong has had to import the ultra-loose US monetary policy, which has left the territory awash with cheap money.

It was during this period of successive Fed QE that Hong Kong banks introduced rock-bottom mortgages based on interbank rates, which helped propel property prices to record highs. Since 2007, property price have increased over 100 per cent despite a succession of measures by the Hong Kong government to tame the market, including heavy transaction taxes for non-residents.

Analysts warned that a policy shift by the Fed can do what seemed beyond the power of Hong Kong’s government — it can reverse property prices in the special administrative region.

Societe Generale’s latest strategy note said that Hong Kong property will soon become a boundary victim of US tightening. It expected 2014 to mark the end of the uptrend in prices. Given how important QE was in pushing prices up, it will leave a sting when it exits, making local property highly vulnerable to subsequent tightening of US monetary policy.

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Reading Time: 2 minutes

Hong Kong’s property prices are expected to drop, reports China’s state newswire Xinhua, saying that prices have been affected by the US Federal Reserve’s continued tapering off of its quantitative easing (QE) policy. The slowing liquidity could jolt both local property and equity markets.

Reading Time: 2 minutes

HongKongHong Kong’s property prices are expected to drop, reports China’s state newswire Xinhua, saying that prices have been affected by the US Federal Reserve’s continued tapering off of its quantitative easing (QE) policy. The slowing liquidity could jolt both local property and equity markets.

Despite the influx of mainland Chinese listings in recent years, property stocks still represent a quarter of the Hong Kong equity market, as judged by the market value of the MSCI Investable Universe Hong Kong Index.

Hong Kong may be particularly affected by US policy because of the extent to which it has gained from the quantitative easing. The longstanding currency peg to the US dollar means that Hong Kong has had to import the ultra-loose US monetary policy, which has left the territory awash with cheap money.

It was during this period of successive Fed QE that Hong Kong banks introduced rock-bottom mortgages based on interbank rates, which helped propel property prices to record highs. Since 2007, property price have increased over 100 per cent despite a succession of measures by the Hong Kong government to tame the market, including heavy transaction taxes for non-residents.

Analysts warned that a policy shift by the Fed can do what seemed beyond the power of Hong Kong’s government — it can reverse property prices in the special administrative region.

Societe Generale’s latest strategy note said that Hong Kong property will soon become a boundary victim of US tightening. It expected 2014 to mark the end of the uptrend in prices. Given how important QE was in pushing prices up, it will leave a sting when it exits, making local property highly vulnerable to subsequent tightening of US monetary policy.

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