Life of Guangzhou - Cheung Kong: HK Property due for Correction

The Hong Kong property market has risen too fast and buyers must look out for a bubble, Cheung Kong (Holdings) Ltd.'s executive director Justin Chiu said.

"The rise is a bit unusual," Chiu said in a Bloomberg interview yesterday. "There should be a correction at some point."

Low mortgage rates and buying by rich mainland Chinese drove a 29 percent gain in Hong Kong home prices last year. The city faces a "huge" potential risk of bubbles forming in its asset markets as low interest rates and high liquidity drive up prices, Norman Chan, chief executive of the Hong Kong Monetary Authority, said last week.

Cheung Kong, controlled by billionaire Li Ka-shing, last month forecast luxury-home prices may rise 15 percent this year, and those for new mass-market residences may climb 15 percent to 20 percent.

Hong Kong prices rose about 40 percent from June to January, and buyers mustn't expect the same pace of growth in prices in 2010, Chiu said.

"When people make their buying decisions, they should be cautious," Chiu said. "Low interest rate environment will not last forever."

Prices for luxury homes in Hong Kong, defined as those costing at least HKD10 million (USD1.28 million) or bigger than 1,000 square feet (92.9 square meters), may rise 20 percent this year, real estate broker CB Richard Ellis Group Inc. said Jan. 12. Prices for non-luxury homes may rise 15 percent, it said.

The Hong Kong government has taken "appropriate steps" to warn investors about overheating in the market and will increase land supply this year to curb gains in home prices, Chiu said.

Hong Kong suspended scheduled land sales in November 2002 as real estate prices fell after the 1997-98 Asian financial crisis, the 2000 bursting of the dot-com bubble and the Sept. 11, 2001, terrorist attacks. It resumed sales in January 2004, introducing a system of selling land through auctions only after developers promise to pay a minimum amount, part of an undisclosed reserve price.

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