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HK steps in to save property prices
From Lisa Barron
HONG KONG, China -- Hong Kong's government has announced a new stimulus package to help restore some life into its once booming property sector, a pillar of the economy. Chief Executive Tung Chee-hwa said on Wednesday the government will suspend land auctions until the end of 2003, and plans to scrap the territory's subsidized housing scheme. Residential property prices in Hong Kong have tumbled about 65 percent from their peak in 1997, which in turn has undermined consumer confidence and fueled a deflationary spiral. Already Tung has admitted that a large part of Hong Kong's deflation is due to the continuous fall in the price of property, which dampens the desire to spend, consume, and invest. But some analysts believe the government contributed to that downward spiral by flooding the property market through land sales and discounted public housing, even as prices were falling. While Hong Kong property stocks did get a boost ahead of the announcement, managing to outperform the broader market, some analysts, like Franklin Lam from UBS Warburg, are questioning whether this turnaround in government policy will be enough. With unemployment at a near record high and Hong Kong struggling to get out of its second recession in four years, most analysts and economists say they don't believe property prices will pick up until the overall economy starts to recover. "The mortgage rates now are the lowest they've been for many, many years," says David Faulkner, from Insignia Brooke. "There's plenty of money available to people who want to buy property and they're not buying. And that tells you there's a lack of confidence in the market and its a bit more fundamental than just tweaking the numbers. And some have slammed the plan for bowing to the wishes of wealthy property developers. Still, most property experts agree the market will turn when it is ready to turn, but at least the government has taken a major step towards helping the market find its own feet.
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