Following on from the Hong Kong government's latest measures to cool the local property market, I gave some thought to other measures the government could take should the market continue upwards. Here's what I came up with:
1. foreign ownership restrictions: I have issues with this one. Hong Kong has almost not foreign ownership restrictions and our whole economy is based on free movement of capital in and out of Hong Kong;
2. increase the supply further: given the lengthy lead time between making land available for development and new properties being ready for occupation, this is a difficult one to get right. Memories of the serious policy mistakes of 1997/8 are still fresh in people's minds;
3. increase interest rates: while the HKD:USD prevents the government from controlling interest rates directly, it could impose a levy on loans used to finance property purchases. This would have the effect of making property ownership more expensive;
4. remove the interest deductability for investment properties and owner occupied homes;
5. cancel the rates concession;
6. increase the deposit requirement again or, alternatively, increase it only for non-owner occupied properties;
7. change the immigration scheme to exclude residential property from the list of eligible assets.
The main issue with items 3, 4, 5 and 6 is that they will impact lower and middle income groups the most. These are the very people the government is supposed to be helping. Guessing whether these (or any other) measures will or will be adopted is a matter of speculation and will depend largely on what happens to the market in response to the measures announced last Friday. One thing that is clear though is that the government has both the tools and the political will to take steps to cool the market further should the need arise.