Not all markets are created equal or the same for that matter.
We all have different challenges and the appropriate responses and measures should be applied to correct and keep healthy that market.
In some markets raising interest rates and applying other guidelines can keep a market in a good place.
The difficulty is in knowing how much to increase and when to apply it.
Going in too early or too late and the response may not achieve the desired consequence(s).
The trick / game is to apply just enough to solve the issue and maintain the Confidence of the market place.
In a Wall Street Journal article this morning an example of a potential real estate bubble developing in Hong Kong needs attention says the IMF.
According to the Journal …
” The IMF said it sees increasing risk of a property bubble in Hong Kong due to continued liquidity inflows and low-interest rates coupled with tight housing supply.
Hong Kong’s low-interest rates are a result of its longstanding policy of tying the Hong Kong dollar to its U.S. counterpart. In effect, that means it imports the low rates set by the U.S. Federal Reserve. But unlike the U.S., where growth has been slow, Hong Kong has been surging as part of a regional Asian upswing. The IMF predicts gross domestic product growth of 6.75% this year and 5%-5.5% in 2011.
The market has also been bolstered by what is known as hot money from China—speculative capital that evades Chinese regulators, who keep tight controls on its currency. Last month, Hong Kong excluded real estate from a system used mostly by mainland Chinese that allows nonresidents to obtain residency if they invest at least 6.5 million Hong Kong dollars (about US$838,000) in local assets.
The efforts could ease pressure on home seekers who have been contending with relentlessly higher prices. The stamp-duty increases—a 15% charge on property sold within six months of purchase, 10% for those sold within six and 12 months, and 5% for those sold between one and two years—could result in lower property prices, and rents would follow similarly, said Stephen Ching, economics professor at the University of Hong Kong.
More owners might pull their units out of the sales market to avoid incurring losses and rent their properties instead, he said.
Sellers lowered asking prices by 3%-5% this past weekend, and renters can expect a similar decline within a month, said Simon Lo, director of research and advisory at Colliers International Hong Kong.
Others suggested renters might have to wait longer. “Despite the recent measures to cool the property market by the Hong Kong government, the rises in the private rentals will likely continue until the middle of next year as rental movements are lagging property prices,” said Hang Seng Bank senior economist Irina Fan. ” [ WSJ , Nov. 22/2010 ]
The dynamics of this market are uniquely local. This is another example why we believe ” local matters ” and a local solution makes sense.
It will be interesting observing how it all plays out , with the real estate market on the verge of a Bubble and controls kicking in.
Can the local authorities contain it, and keep the real estate market healthy and steady ? Or is a Bust on the way for this market.
Will they do too little and too late to have any effect ?
Will individuals bring in more money into the market place because they fear more strict measures will be imposed/ needed and applied in the future so they may bring in more now ? Only to force the local authorities to re-think the approach and bring in even tougher guidelines ?
An over dosed measure that may kill every moving thing .
How much money is there , trying to move about/and Out of China ? [ Yes I know Hong Kong is in China, but its a step outwards.]
So many possibilities and questions, let’s discuss them ; leave a comment below or
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