Low U. S. Rates Provide Encouragement Hong Kong Property Prices-00-7233

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The Hong Kong government took new steps Friday to rein in the city's surging property market, in another example of how low interest rates in the U. S. Are rippling worldwide.

Officials in Hong Kong, a special administrative region of China, were prompted to move as the local economy defied fears of a global economic slowdown. The government Friday raised its full-year economic-growth forecast after reporting gross domestic product grew faster than expected in the second quarter, despite its forecast that second-half export growth may slow.

Home prices have risen 13% so far this year, extending a 30% increase in 2009, raising worries when it comes to the possibility all of a sudden plunge in property prices if economic conditions deteriorate.

On Friday, Hong Kong's de facto central bank broadened a rule restricting home mortgages to 60% of the value of the property to apply to real estate worth at least 12 million Hong Kong dollars (when it comes to $1. 5 million). The rule previously used to properties over HK$20 million. The move efficaciously extends limits on lending in the luxury property market to ...
... the wealthy city's upper midtier market.

City officials likewise said they would put restrictions on flipping sales contracts on new condominiums before the properties are delivered and make further and added city land available to developers.

"We want to put in position the preventive measures before a bubble forms," said Hong Kong Financial Secretary John Tsang, who attributed the skyrocketing housing prices to the combined elements of ample liquidity, historically low interest rates and fixed property supply.

Much of Hong Kong's current strains may be traced back to the U. S. Hong Kong maintains a peg with the U. S. Dollar, which means it fundamentally imports U. S. Interest-rate policy. The U. S. Federal Reserve on Tuesday expressed interest rates will be low for even longer than previously expected.
But not similar to the U. S. , Hong Kong is growing at a healthy clip. Second-quarter economic output grew a still strong 1. 4% from the previous quarter, slower than the original quarter's sequential 2. 1% GDP rise. The healthy selective information prompted the government Friday to raise its full-year GDP growth forecast to 5% to 6% from 4% to 5%.
Hong Kong's economy likewise continued to get a boost from mainland China, peculiarly from the speculative capital inflows known as hot cash. Wealthy mainland residents make up a significant chunk of buyers of Hong Kong property for investment intents. Hong Kong has its own legal scheme and immigration controls, though its leaders are at long last selected by Beijing.

The low U. S. Interest rates are having an impact in other components of the earth. The narrow divergence amongst U. S. Rates and Japan's rock-bottom policy rate is one factor in the rapid appreciation of the Japanese currency.
Frances Cheung, a senior strategist at Credit Agricole CIB, said her bank will raise its forecast for Hong Kong's 2010 GDP growth to 5. 5% from 5. 2% in light of the second-quarter selective information. "I suppose the each year growth of GDP will moderate in the second half due to the fading base effect," Ms. Cheung said. Hong Kong's economy contracted 2. 8% last year, its original full-year decline since 1998.

The new measures declared Friday follow a assortment of measures the government has introduced this year to cool the city's sizzling property market. In February, it raised the stamp responsibility, or transaction levy, on sales of luxury property valued at more than HK$20 million to 4. 25% from 3. 75%.

It is having likewise been putting more prime web sites up for auction and has sold around 4,000 subsidized apartments to provide more low-cost homes to middle and lower-income residents.
Mr. Tsang said Friday the government will auction three extra web sites to developers on its latest application list in the balance of this fiscal year, which ends March 31, irrespective of whether any developers table an offer. These web sites could conciliate when it comes to 540 small, residential units, he said.

Mr. Tsang likewise said the government will likewise distinguish more rural web sites for residential use and look at converting around 20 hectares, or when it comes to 49 acres, of land originally earmarked for industrial or commercial use into residential development web sites.

By CHESTER YUNG And JOYCE LI

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