No one knows whether King Canute believed he could hold back the tide or, by ordering the waves back, was in fact intending to show the limits of power. Hong Kong’s regulators presumably do not want to display impotence, but until the US Federal Reserve tightens policy, trying to stem the liquidity flooding into property has Canute-like qualities.
Over several rounds, regulators have taken aim at speculators, foreigners, the residential market more generally, and, late on Friday, the boom in loans for car-parking spots as well as the wider commercial sector. Stamp duty has been raised, and banks have been “recommended” to lower loan-to-value ceilings. Yet the market merely shrugged: the Hang Seng property index ended on Monday just 0.3 per cent lower and the six biggest local developers lost HK$7.5bn ($980m) in market cap – less than half of what they lost following the last round in October.
The new measures will probably cool demand for only a few weeks. The reasons are clear: when five-year US Treasury yields are at 0.83 per cent, being asked to stress test mortgages for affordability following a 300 basis point rise in interest rates looks like hawkish fantasy so long as the Fed does not move. Since the US began quantitative easing, Hong Kong home prices have doubled.