Hong Kong’s property market and macroprudential measures

Hong Kong Monetary Authority
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Hong Kong Monetary Authority: Bank for International Settlements

A chapter in Macroprudential frameworks, implementation and relationship with other policies, 2017, vol. 94, pp 141-152 from 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.

Date: 2017
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