HONG KONG: The Hong Kong Monetary Authority has declined to comment on reports and speculation that it was considering raising the down payment required to buy luxury property amid fears of a property bubble, but said HKMA chief Norman Chan had discussed the property market with banks this week.

"Mr Chan held a meeting with five major banks on Tuesday to hear their views on the financial market, including the property market and mortgage lending," an HKMA spokeswoman said yesterday.

But she did not comment on press reports that the HKMA was considering lowering the mortgage limit on properties valued at HK$20 million (US$2.6 million) and above to 60 percent from 70 percent.

Media reports said people invited to the meeting with Chan, who started as HKMA chief this month, included Peter Wong, who heads HSBC's Hong Kong unit, and Hang Seng Bank Chief Executive Officer Margaret Leung.

Property prices in the city have surged by nearly 30 percent this year, and by more in the luxury sector where they now top peaks reached in 1997 - just before the last property bubble burst, triggering a 70 percent drop in residential prices over six years.

A luxury apartment in an upmarket area of Hong Kong Island sold last week for HK$71,280 per square foot (HK$88,000 per square foot of usable area) - surpassing London prices to set a world record per square foot.

Luxury property is being boosted by demand from wealthy mainland Chinese buyers and other overseas investors as excess global liquidity and Hong Kong's currency peg to a weak US dollar make its assets attractive, analysts say.

Chief Executive Donald Tsang said last week that the government was ready to release more land for sale amid fears of a potential property bubble.

Home prices in Hong Kong have rallied this year on record-low interest rates and an influx of money from China. Sales of luxury homes worth more than HK$10 million almost tripled in September, according to the Land Registry. Prices of luxury homes may rise further because of a lack of supply as an economic recovery spurs demand, according to property expert Savills, although the government has recently said that it has plans to increase the supply of land and units for sale and to make 1000 aged industrial sites available for conversion and refurbishing to help forestall such a shortfall.

Some banking sources believe since most home buyers pay in cash, tightening lending requirements or raising mortgage rates would be of little help in cooling off the luxury market.

The six-member Hang Seng Property Index has jumped 77 percent this year, outpacing the 56 percent gain for the benchmark Hang Seng Index.

China Daily/ agencies

(HK Edition 10/22/2009 page4)