Government Economist Helen Chan (center) presents the First Quarter Economic Report 2010 at a press conference Friday with Principal Economist Andrew Au (left) and Assistant Commissioner for Census and Statistics Lily Ou-yang. She said that the property market has turned steadier recently because of the government measures. Provided to China Daily

No bubble has been seen in the city's property market despite an unusual surge in prices last year, the government said Friday.

"The property market gained further momentum during the first quarter but has turned steadier more recently, following the series of measures introduced by the government to ensure its stable and healthy development," government economist Helen Chan said when presenting the first quarter economic report.

Property prices climbed another 5 percent in the first quarter this year after surging by nearly 28 percent last year as the economic downturn gradually receded.

Chan called the rise in home prices as "unusual", considering the fact that the pace of the recovery in the local economy is much slower, although a robust 8.2 percent GDP increase year-on-year.

While calling for vigilance regarding the steep rise in property prices, the government economist emphasized that no bubble has been seen in the local housing market so far.

"The extremely low interest rates around the globe, the ample liquidity in the financial markets and the limited flat supply in the local property market are responsible for the surge in property prices last year," Chan explained.

"The government is mindful of asset bubble risk. It will do everything to forestall asset bubble growth in the future that may jeopardize the economy. Though there is no bubble in sight, the government will not be complacent," Chan said.

The government economist also advised property end users and investors to be prudent and cautious in making their decisions to purchase property now, since the low interest-rate environment will not remain forever.

The ultimate rebound in interest rates will squeeze property buyers' ability to repay their mortgage loans.

The government has conducted stress tests on ordinary households' ability to repay their mortgage loans, Chan said.

"The results show that if interest rates go up by 1 percent, the ratio of the mortgage installment payments to the total disposable income of the loan borrowers will increase by 9 percent. If interest rates increase by 3 percent, the ratio will surge 30 percent," she said.

Worries about a property bubble forming in the city have prompted the government to announce a series of measures targeting the housing market recently.

However, the government may feel somewhat relieved, as initial signs show that the rise in home prices is easing.

Home prices fell 1.0 percent last week from the previous week, purportedly due to government measures to cool the overheating property market and concerns about Europe's debt crisis, Centaline Property Agency Ltd, one of the biggest real estate broker agencies in the city, said in a report Friday.

The popular home prices index for existing flats in the city, the Centa-City Leading Index (CCL) compiled by Centaline and the City University of Hong Kong, slipped to 79.86 as of May 9 from 80.68 the preceding week, or by 1.0 percent, the biggest fall in nine weeks, indicating easing home prices.

Oswald Chen contributed to the story

China Daily

(HK Edition 05/15/2010 page3)