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20/06/2011

 * HK property market unusually hot - financial secretary

* Analysts say subsidised housing will have limited impact
* Property sub-index at lowest in close to a year (Adds quotes, details)
By Lee Chyen Yee
HONG KONG, June 20 (Reuters) - Hong Kong's property market is "unusually strong", with the government ready to introduce more drastic measures if necessary, Financial Secretary John Tsang said on Monday, pushing real estate shares to the lowest in almost a year.
Hong Kong, home to the world's most expensive residential and office properties, has seen housing prices rise 12.5 percent this year, surpassing 1997 peaks amid low interest rates, buying by mainland Chinese investors, and strong economic growth.
The Chinese territory, known for its towering residential buildings and high-end apartments perched on hilly terrain, has seen housing prices climb 72 percent since the start of 2009, after the global financial crisis.
Hong Kong's property stocks retreated on Monday after Tsang's comments and on media reports quoting Chief Executive Donald Tsang as saying that the government may begin a scheme for subsidised housing to increase market supply.
"Hong Kong's housing sector is unusually strong because of loose monetary policy in advanced markets such as Europe and the United States, ample liquidity, super-low interest rates and strong economic growth," Tsang said in his latest blog. "The risk of a bubble is increasing by the day."
After the midday break, the Hong Kong stock exchange's property sub-index fell 3 percent to an intraday low of 26,067.03 points, the weakest level since July 2010, underperforming the Hang Seng Index's 0.7 percent decline.
Li Ka-shing's Cheung Kong (Holdings) Ltd dropped more than 4 percent to a nine-month low and Sun Hung Kai Properties Ltd , Asia's largest property developer by market capitalisation, fell more than 3 percent to a near one-year low.
The bubbly property market in Hong Kong, home to real estate tycoons such as Li Ka-shing and Lee Shau Kee, has prompted Standard & Poor's to forecast a possible sharp correction if interest rates rise too quickly.
Media reports over the weekend said regulators might start building homes under an old home ownership scheme, leading to a 50 percent fall in transactions compared with a week ago.
The "Home Ownership Scheme" (HOS) is a government subsidised housing programme to give eligible low-income residents a chance to purchase flats at a 30 to 40 percent discount to the market price.
The government suspended the construction and sale of HOS flats in November 2002, and in 2007 resumed the sale of HOS flats that had been built but not sold.
Analysts said the scheme would have a short-term negative impact, although its effects would be limited in the longer run as Hong Kong's property bubble was in the luxury sector, where wealthy Chinese were snapping up flats for cash.
"Increasing supply for local citizens is not going to do much. We've seen prices shoot up because of overseas buyers," Wong Leung-shing, an analyst at Centaline property agency. "I won't be surprised if the government comes up with more policies targeting overseas buyers. They can take a page from what China is doing, which is to restrict the number of properties people can buy," Wong said.
Hong Kong, like most of Asia where people see property ownership as a way of amassing wealth, has implemented harsh policies over the past year, slapping high stamp duties on short-term transactions, lowering the loan-to-value ratio and pledging to increase supply.
Hong Kong Chief Executive Donald Tsang told media during a visit to Australia that home prices in Hong Kong were "quite frightening" and pledged that his administration would do more to slow the market, the South China Morning Post newspaper reported.
John Tsang told reporters on Monday that the resumption of construction of subsidised housing was in discussion and that Chief Executive Donald Tsang would address the concern in his policy speech scheduled to be delivered in the third quarter. (Additional reporting by Donny Kwok; Editing by Chris Lewis)

SOURCE: REUTERS



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