Blog

US interest-rate normalization could be faster than expected

A gist of the blog:

I am pleased to attach my latest blog for your perusal (http://www.fso.gov.hk/chi/blog/blog190317.htm). As the Government continues to increase land and housing supply, and given the changes in external economic environment, the fundamental factors affecting local property market have already changed. The number of flats which have commenced construction in the past five years has significantly increased by 70% to around 18000 per year, when compared to the five-year period before that. And the projected supply from the first-hand private residential property market in the next three to four years will be around 94000 units.

More importantly, the pace of the US interest-rate normalization could be faster than expected. Under the Linked Exchange Rate System, it would only be a matter of time before the local interest rates eventually increase following the rise of US interest rates. According to past experience, a rise in interest rates will certainly have an effect on property prices. It is worrying to see that the property prices continue to increase despite the changing market conditions. There is simply no room for the Government to remove the demand-side management measures for the time being. The public should carefully assess the potential risks before making a home purchase decision.

March 19, 2017