2 December 2014 - Financial Secretary, John C Tsang held a press conference on Hong Kong's latest overall economic situation yesterday. He stated that the government has been keeping an eye on the risk of a property bubble, and will adopt appropriate measures when required.
Tsang started the conference by expressing his worries about the global economy, with the economic prospects of Europe and Japan looking largely unfavorable. The United States, though in recovery, is accompanied by undercurrents. Regarding the end of the US bond purchase program, Tsang believed the Federal Reserve will certainly increase the interest rate, though the exact timing of this will depend on the overall economic situation of the States, especially in relation to employment and inflation rates.
In addition, Tsang stressed that the government is staying alert on the danger of a property bubble. The average overall property price of Hong Kong this October is 56% higher than the level reached in 1997. The affordability ratio (price-to-income ratio) in Q3 this year hit a high of 57%, far higher than the average of 47% recorded in the past 20 years. Once the interest rate is raised by 3% to a normal level, the affordability ratio is set to skyrocket to 74%, casting a huge barrier to property buyers.
In closing remarks, Tsang reminded people that times of low interest rates and excess capital will reverse eventually. He reiterated that measures will be taken, if necessary, in response to the market’s situation.
