According to RICS Global Real Estate Weekly, the Hong Kong housing market appears to be easing back on an uptrend of the number of home loans approved.

“The previous survey results for April showed that the number of loans approved declined in the month by 2.3% to 15,907, but this was coming on the back of a particularly strong reading in March when approvals reached their highest for eight months (16,407). In addition to home loans, the latest inflation data for May is released on Tuesday 22^nd, “ stated the report.

It explained that “the March number of approvals is running above the long run average (10,000 since 2004), and does so still once the data is seasonally adjusted. However, the seasonally adjusted series shows that this is the first reversal in the upward trend for five months. It would appear that investors are becoming wary of potential government action as they try to forestall rapid inflation in house prices (anecdotal evidence suggests that property prices increased by around 25% last year). Potential measures to slow the economy and prevent a property bubble forming appear to be having the desired affect as the housing market now seems to be easing back. Indeed, the year on year growth in approvals has been retreating since January. Other signs of a tightening have been the continued decline in loan to value ratios on new mortgages. The non-seasonally adjusted number has fallen from a recent peak of 66% in June 2009 to 60% in April. Increasing worries over the sustainability of the current house price boom could be making banks more cautious with regard to lending criteria.”

The report also stated that this trend is “consistent with the latest business surveys such as the PMI index which whist still signalling expansion, fell to its lowest reading in eight months. This suggests the pace of economic activity in Hong Kong is starting to slow.”

RICS expects the slowing down of the economy to continue to adversely affect housing market activity within the short term.