Hong Kong has low transaction costs and no capital gains tax. That makes the city’s housing market a popular target for ‘hot money’ when liquidity enters the global economy, as expected with QE3. — Reuters
HONG KONG: The latest stimulus from the US Federal Reserve increases the risk that Hong Kong's redhot property market will overheat and authorities may act to deal with that at an “appropriate” time, Hong Kong's de facto central bank said.
The Federal Reserve kicked off another aggressive stimulus programme on Thursday, known as QE3, saying it would pump US$40bil into the. economy each month until it saw a sustained upturn in the weak jobs market.
Hong Kong, with one of the world's most open economies and a property market that is easy to enter, has low transaction costs and no capital gains tax. That makes the city's housing market a popular target for “hot money” when liquidity enters the global economy, as expected with QE3.
“Due to the launch of QE3 and as the risks of the euro debt crisis calm down, the chance of an overheating asset market in Hong Kong is escalating, so we will introduce suitable measures at the appropriate time,” Norman Chan, chief of the Hong Kong Monetary Authority, told reporters.
“The risk of an overheating property market also suggests a potential asset bubble,” Chan added.
Chan said he did not expect the US measures would put significant pressure on Hong Kong's low interbank interest rates. Hong Kong's interest rates are linked to those in the United States because the Hong Kong dollar is pegged to the greenback.
Chan reiterated that the Hong Kong government had no plan to change the Hong Kong dollar's peg to the US currency.