Though small in size, it can still teach something to the U.S.
There’s one thing that can make Americans jealous of Hong Kong, other than the number of Rolls Royce that parade their busy streets — Recently, Bloomberg News reported the property market in this tiny Chinese territory has begun to pick up amidst the global financial crisis. It states, “… The value of residential units changing hands increased 26.1 percent from May to HK$49.71 billion ($6.41 billion). By volume, the transactions rose 17.1 percent from May to 13,805, the government said today on its Web site. That’s the highest since January 2008. Record-low mortgage rates are fueling home purchases in Hong Kong, where prices per square meter for luxury residences are the second-highest in Asia. Prices are also rising amid hopes that recessions in world’s biggest economies may have reached bottom on the back of government stimulus packages.”
Hong Kong banks have increased their lending to interested homebuyers, stimulating its property sales boost. Never mind the growing unemployment figures or the fall in home values. What’s keeping an upbeat sentiment in the market is that they are resuscitating a weak market.
Here in the U.S., there’s little upbeat to talk about. The Case-Shiller Home Price Index reveals that the 20-City Composite Index declined by 19 percent. Phoenix, Las Vegas, and San Francisco are still the worst hit by the slump. Although the recession has influenced banks to be more wary in their lending, the government has done its part in pouring in tax payers’ money to revert the situation. But earlier this year, the Federal Reserve found out that their bailout program has done nothing ensuing. None of the banks agreed to reveal what had happened to the more than $1 billion that they received. Not even the Associated Press can convince them. But in February, the Treasury Department defended that although nearly 60 percent of these banks tightened their lending standards on credit card and other loans, lending would have fallen further without government support.
The Treasury Department’s March Bank Lending Survey press release states, “… Still, there were modest signs of stabilization in Q1: the pace of the homebuilding decline slowed significantly, mortgage rates moved to historic lows, and consumer spending and confidence edged higher. There were also signs of easing in financial pressures outside the banking sector… However increases in first lien mortgages and other consumer loans were smaller than they were in February. Households are facing growing pressures from a weakening labor market and further declines in their wealth.”
And that means our luxury home market won’t still match the market movement in Hong Kong.