Bernanke’s Open Ended QE: More Property Curbs in Hong Kong

Hong Kong introduces more regulatory property curbs which are indirect form of capital controls.

From Bloomberg,

Hong Kong has widened efforts to cool home prices that have gained almost 90 percent since early 2009, as the U.S. Federal Reserve’s third round of quantitative easing risks fueling asset bubbles in the city.

The Hong Kong Monetary Authority will limit the maximum term on all new mortgages to 30 years, Norman Chan, the de-facto central bank’s chief executive, told reporters on Sept. 14. Mortgage payments for investment properties can’t be more than 40 percent of buyers’ monthly incomes, from the current 50 percent, he said.

The curbs came after the Hang Seng Property Index completed a six-day, 11 percent rally on optimism the Fed’s QE3 program would fuel inflows to the city, which tracks U.S. monetary policy because of a currency peg to the dollar. Record low mortgage rates, an influx of buyers from other parts of China and a lack of new supply have underpinned the housing market, prompting Hong Kong Chief Executive Leung Chun-ying to announce plans in the past month to accelerate land sales and give preference to local buyers in some projects.

More:

The introduction of QE3 “will create the potential for renewed influx of capital into Hong Kong,” Chan said. “We have to stand ready for it.”

The central bank also raised the minimum down payment on investment properties for buyers who derive their income from outside Hong Kong. Investors using their assets -- not income -- to borrow can now only take out loans for as much as 30 percent of a property’s value, Chan said. The restrictions are effective immediately.

Inflationism essentially sow the seeds for protectionism through various forms of interventionism as capital controls. On the other hand, protectionism fosters antagonism. Central banking policies, thus, promotes social instability even in what used to be economically free nations.