Hong Kong Housing Price Bubble About To Pop???

As I wrote about before, here and here, I view Hong Kong's economic prospects through the rose colored glasses of the US Federal Reserve. Monetary policy in the SAR is determined by the Fed since Hong Kong money supply is determined through a currency board mechanism. So when the US Central Bank tightens monetary conditions, by definition, Hong Kong does too.

A close follower of the US Federal Reserve, Larry Kudlow worries that the Fed may be pursuing a damaging monetary policy course that would threaten the economy in the US. Price increases in many commodities particularly fuel and large increases in the price of housing have caused US Central Bankers concern over the prospects of inflation.

That leaves us with the age-old question of whether or not the central bank will over-tighten us into a recession. Fed policies have prevented oil inflation from spreading throughout the economy, but they should quit raising rates while they're ahead.

Eventually monetary tightening will bite and reduce economic growth at one point. The question is whether Greenspan and company can stop raising rates before damage is done to the economy. This is always a gamble, since its difficult to determine what that level is. Uncertainty will reduce the desire for individuals to take risk and prices of frothy commodities should moderate.

Particularly, such frothy items as housing, where growth in prices has been nothing less than spectacular over the past 25 years. However, it appears as if the housing market is starting to get a little "ill" in the United States

The jump in prices is starting to pinch. Homes are less affordable now than at any point in the last 14 years, a report from the National Association of Realtors earlier this month showed. Still, the average household had 121 percent of the income needed to purchase a property at the median home price of $208,500, the report showed.

And Greenspan is predicting some trouble ahead for housing prices

"As part of that process, house turnover will decline from historic levels, while home price increases will slow and prices could even decrease," he said, the second time in two days he'd warned that housing prices may have risen too far, too fast.

If the US housing market starts to cool, you can bet that Hong Kong will too. We already seeing some of the signs of a cooling or even falling market here. And don't listen to those idiot tycoons. They would try to sell ice to Eskimos if it could make them a buck and they are only "talking their position." Trying to persuade the last gullible Hong Kong housing consumers to spend their hard earned savings on an overly priced, poorly constructed shoe box that may prove to be worth only a fraction of what it is today in a decade or so.