HONG KONG, July 22, 2011 /PRNewswire-Asia/ -- The latest data on residential mortgage lending is released by the Hong Kong Monetary Authority (HKMA) in the coming week, highlighting loan applications and approvals for June. The results are likely to be monitored closely as the HKMA look to see what effects, if any, the latest round of tightening measures have had. On June 10th officials lowered maximum LTV ratios for a raft of properties (defined by value), and introduced stricter lending criteria for non-domestically based purchasers. The less accommodative policy environment has become necessary as the authorities have become increasingly concerned by the threat of the market overheating. Indeed, the latest figures from Centadata show that real estate prices have risen to near all time highs for the region; the weekly index averaged 81.8 in 2010 but has already jumped to 96.2 for the first 6 months of the year.
Some implications of Euro area financial contagion for property sector
As the European sovereign debt crisis spreads further afield, we look at some of the implications from a property angle. But first, a brief recap of the most recent development, which arguably centre on Italy. Although Italy’s public debt situation is well known, market fears surfaced over the credibility of its new €48bn fiscal austerity package (it is heavily back loaded, which means the plan may be diluted over time). This is being compounded by the political uncertainty over the implementation of the plans following an open rift between Prime Minister Berlusconi and Finance Minister Tremonti. The Italian government bond market sold off heavily and sent a wave of fear rippling through the rest of the global financial system.
RBI set to raise the repo rate again as inflation concerns persist
The Reserve Bank of India (RBI) is due to meet on Tuesday 26th and is widely expected to hike the key policy rate by a further quarter point; this would lift the closely watched repo rate to 7.75%. The pressure on the authorities to continue tightening monetary policy largely reflects the fact that inflation remains significantly above the comfort zone previously identified by the RBI (5 to 5.5%). Although our suspicion is that the headline WPI inflation rate will not move materially higher from its current rate of 9.4% over the coming months, the likelihood is that it will remain at relatively elevated levels through till the early part of 2012.
US housing sector still in the doldrums
The coming week sees the release of a raft of housing data, starting with the S&P/ Case-Shiller house price index (HPI) for May on Tuesday, 26th followed by Housing Vacancies (Q2) on Friday, 29th. The Case-Shiller HPI continued to decline in April, falling 0.1% on the month, on a seasonally adjusted basis. However, it was the smallest decline since July 2010, and coincided with the start of the spring-summer home buying season. It is too early to decipher whether this is a turning point or simply due to cyclical factors; May’s data should give us a clearer picture. Compared to year ago levels, the HPI is 4% lower, although some of that is due to base effects, with last year’s tax break giving a temporary boost to the housing sector.
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