Hong Kong to keep after property speculators

The frantic need to curb property speculation seems to trump all other considerations in Hong Kong.

Financial Secretary John Tsang has emphasized Hong Kong will not relax its property-market policy curbs despite sizeable reductions in housing prices and transactions.

“Currently, our measures, which aim to keep the home market development stable and healthy, are effective,” Tsang said. “We will continue the existing measures.”

Since the middle of last year, Hong Kong has sought to contain a vigorous rise in housing prices that rose to a 14-year high. Tsang’s stern message echoes that of China which said last week it will maintain property market restrictions to force values down to reasonable levels.

The city government raised borrowing costs, imposed extra transaction taxes and mandated higher down-payment requirements in a successful effort to stem demand—but at a steep price.

Property deals for all building units in Hong Kong in January plunged by 55% year-on-year reflecting the austerity measures’ effects. The figure for January was lower by 20% compared to December.

Revenues from property transactions in January dropped 53% year-on-year to HK$27.8 billion and were off 15% from December.

Home prices fell 6% from their peak in June 2011, according to Centaline Property Agency, the city’s biggest closely held real-estate broker.

Tsang also warned the U.S. insistence on maintaining low interest rates will continue to hurt Hong Kong as Hong Kong’s rates depend on the U.S.’ because of a currency peg.