HKMA acts to cool property market after US launches QE3 stimulus

Hong Kong's central bank moved to cool the city's overheating property market by making second mortgages harder to get, but some analysts are betting the new measures won't be enough to dampen prices.

The announcement yesterday by Norman Chan Tak-lam, chief executive of the Hong Kong Monetary Authority, came on the heels of the US Federal Reserve's unveiling on Thursday of a third round of quantitative easing measures (QE3) to provide liquidity and to keep US interest rates low until 2015.

Because the Hong Kong dollar is linked to the US dollar, local rates will remain low, underpinning the real estate market.

The new measures, which mostly affect second-property buyers, were announced after the local stock market closed. Reacting to the Fed's move, Hong Kong property stocks rose yesterday in a buoyant overall market.

"HKMA needs to tighten the mortgage policies to reduce the risks faced by the banks as the QE3 and the improvement of the European debt crisis" will threaten to create an asset bubble, Chan said.

"The HKMA will consider more measures when needed."

This marks the fifth round of mortgage measures by the HKMA since 2009. Previous measures were aimed mostly at the luxury market.