Just a quickie note, for those who are interested. Two new IMF working papers investigate China’s and Hong Kong’s property markets. Their conclusion is that there are and will continue to be a structural and fundamental basis for the rapid price increases seen in both countries, though some parts of China’s high end property market appear overvalued (abstracts):
Are House Prices Rising Too Fast in China?
Ahuja, Ashvin, and Lillian Cheung, Han Gaofeng, Nathaniel John Porter, & Zhang WenlangSharp increase in house prices combined with the extraordinary Chinese lending growth during 2009 has led to concerns of an emerging real estate bubble. We find that, for China as a whole, the current levels of house prices do not seem significantly higher than would be justified by underlying fundamentals. However, there are signs of overvaluation in some cities’ mass-market and luxury segments. Unlike advanced economies before 2007-8, prices have tended to correct frequently in China. Given persistently low real interest rates, lack of alternative investment and mortgage-to-GDP trend, rapid property price growth in China has, and will continue to have, a structural driver.
Are House Prices Rising Too Fast in Hong Kong SAR?
Ahuja, Ashvin & Nathaniel John PorterSharp increase in house prices in Hong Kong SAR in 2009-2010 has led to concerns of an emerging real estate bubble. According to our measure of price deviation from fundamentals, which should be taken as an early warning indicator of market exuberance, the current level of house prices in Hong Kong SAR does not seem to be significantly higher than would be justified by underlying fundamentals. Moreover, unlike advanced economies before 2007-8, deviation from fundamentals has not been persistent in Hong Kong. Going forward, low interest rate and improving growth prospects, as well as a tight supply, particularly in the mass market, means that house price growth will continue to be strong. This is the period in which vulnerability may be accumulating, and tight prudential standards and fiscal measures will be required to tame price inflation.
I haven't read either paper yet (the notifications appeared in my inbox not 30 minutes ago), but some of the metrics appear well worth pursuing if they can be applied to the Malaysian market.
Technical Notes:
- Ahuja, Ashvin, and Lillian Cheung, Han Gaofeng, Nathaniel John Porter, & Zhang Wenlang, "Are House Prices Rising Too Fast in China?", International Monetary Fund, Working Paper No. 10/274, December 2010
- Ahuja, Ashvin & Nathaniel John Porter, "Are House Prices Rising Too Fast in Hong Kong SAR?", International Monetary Fund, Working Paper No. 10/273, December 2010
Posts
IMF statement is contrary to China & HK policy makers'.
ReplyDeleteWhat Chinese government have done so far is pretty drastic in curbing property price escalation. Still, the effects are little. Thanks to US Fed printing press.