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Hong Kong’s property market and macroprudential measures

In: Macroprudential policy frameworks, implementation and relationships with other policies

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  • Hong Kong Monetary Authority

    (Bank for International Settlements)

Abstract

As property market bubbles could have huge repercussions on financial and macroeconomic stability, flexible policies to lean against the wind are vital. Hong Kong SAR has long relied on macroprudential measures, particularly caps on loan-to-value (LTV) ratios, to contain banking sector risks that may arise from these bubbles. This note attempts to broaden the understanding of the implementation of macroprudential policies by sharing Hong Kong’s experience. In particular, our research shows that macroprudential policies, especially LTV policy, is effective in strengthening banks’ resilience to property price shocks through reducing borrowers’ leverage. However, decisions on the timing and intensity of LTV tightening and loosening require a considerable degree of judgment and discretion. This calls for property market activities, as well as potential risks to the banking sector, to be frequently and comprehensively monitored.

Suggested Citation

  • Hong Kong Monetary Authority, 2017. "Hong Kong’s property market and macroprudential measures," BIS Papers chapters, in: Bank for International Settlements (ed.), Macroprudential policy frameworks, implementation and relationships with other policies, volume 94, pages 141-152, Bank for International Settlements.
    • Handle: RePEc:bis:bisbpc:94-12
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    References listed on IDEAS

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    1. Yiu, Matthew S. & Yu, Jun & Jin, Lu, 2013. "Detecting bubbles in Hong Kong residential property market," Journal of Asian Economics, Elsevier, vol. 28(C), pages 115-124.
    2. Frank Leung & Kevin Chow & Gaofeng Han, 2008. "Long-term and Short-term Determinants of Property Prices in Hong Kong," Working Papers 0815, Hong Kong Monetary Authority.
    3. Wong, Eric & Ho, Kelvin & Tsang, Andrew, 2015. "Effectiveness of loan-to-value ratio policy and its transmission mechanism:empirical evidence from Hong Kong," Journal of Financial Perspectives, EY Global FS Institute, vol. 3(2), pages 93-102.
    4. Eric Wong & Kelvin Ho & Andrew Tsang, 2015. "Effectiveness of Loan-To-Value Ratio Policy and Its Transmission Mechanism ¨C Empirical Evidence from Hong Kong," Working Papers 202015, Hong Kong Institute for Monetary Research.
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