Rate Hikes Unlikely To Crash HK Home Prices: IMF

The International Monetary Fund has ruled out a crash in Hong Kong home prices despite expected hikes in interest rates, saying demand remains high and supply limited.

Home prices in the city have zoomed up to record levels over the last few months and US interest rate rises have prompted warnings from experts, including the Financial Secretary and Monetary Authority head, on the impact of higher mortgage conditions on the housing market.

The IMF's resident representative in Hong Kong, Sally Chen, said they have warned time and again that homes are over-valued.

"We have warned repeatedly on the possibility of higher interest rates dampening the household balance sheet through the wealth effect," she said.

But she said a price bust is only a remote possibility. "There is essentially a structural imbalance between supply and demand," Chen said. "The demand factor stays fairly buoyant."

But she said they're keeping a close eye on how rising interest rates will affect the SAR's property market.

She was speaking at the release of the IMF's assessment on regional economic outlook, which forecasts the city's GDP growth rate to be at 3.6 percent this year. Its growth forecast for the mainland is 6.6 percent for the same period.

For the Asia Pacific region, the IMF expects growth of 5.6 percent.