Traders and investors hoping that China will soon loosen financial restrictions designed to cool China’s real estate market won’t find any good news in the August 30 land auction in Hong Kong.
A parcel in Kowloon Tong went for $165 million in an auction run by Hong Kong’s government. That set a per-square-foot record for Kowloon and signaled that the market for luxury properties is still in overdrive.
Hong Kong homes prices are up 45% since the beginning of 2009, but they have fallen 3% since the Hong Kong government put into place new measures to damp price increases on August 13.
The resumption of land auctions—there have been six this year–was one part of that program. The auctions were suspended in 2004 as Hong Kong government moved to support falling home prices.
Besides local measures in Hong Kong, the Beijing government has put restrictions on second and third mortgages, required banks to tighten standards on lending, and heightened regulatory scrutiny of banks and their relationships with affiliated lenders. All that has raised fears that any slowdown in the real estate market could lead to a wider slowdown in the general economy.
In recent months the Shanghai stock market has rallied whenever traders decided they’ve seen signs that the government is going to back off some of these restrictions. And it has fallen whenever traders have become convinced that the restrictions aren’t about to change—or might even get stiffer.
Real estate speculation and soaring prices aren’t limited to Hong Kong and China. Singapore recently introduced controls designed to slow price increases there.