By: Mr Simon Smith, Head of Research & Consultancy Savills Hong Kong
REMEMBERING 1997 – IS ANOTHER PROPERTY CRASH POSSIBLE TODAY?
Hong Kong recently marked the 20th Anniversary of the 1997 Handover of the territory from Britain to China and thoughts also turned to the Asian Financial Crisis which unfolded in the same year.
What began in Thailand with the collapse of the Thai Baht soon spread to elsewhere in the region, including Hong Kong. A speculative attack on the Hong Kong Dollar peg resulted in higher overnight interest rates and a falling stock market. It was ultimately a war which the government won but other factors compounded uncertainty in the property markets including tighter lending conditions, higher interest rates and a pledge by the new administration to dramatically increase the supply of residential apartments. At a time when prices were at record highs, affordability at record lows and speculation was rife, greed quickly turned to fear and office, residential and retail prices fell 71%, 60% and 52% respectively from 1997 to 2003.
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