Hong Kong’s economy beat analyst expectations in the first quarter as retail sales in the city recovered and property prices reached new records.
Gross domestic product expanded 0.7 percent in the three months through March from the previous quarter, beating median estimate for 0.2 percent growth from analysts surveyed by Bloomberg.
“Domestic demand was fairly strong and investments picked up quite nicely,” said Marvin Chen, economist with JPMorgan Chase & Co. in Hong Kong. “We’re not surprised by the beat but the magnitude was quite strong.”
Existing home prices have climbed to fresh records, according to the Centaline Property Centa-City Leading Index. Even after the Federal Reserve raised interest rates -- a move that presages higher mortgage rates -- developers have seen brisk sales.
Seeking to cool the market, the Hong Kong Monetary Authority late Friday announced it would lower caps for bank loans to property developers. From June 1, the caps for construction finance will be cut to 40 percent of site value and 80 percent of construction cost, with the overall limit reduced to 50 percent of the expected value of completed properties. For property developers with weaker finances, banks should consider further lowering the financing ratios, the monetary authority said.
“This is likely to be as good as it will get,” said Chang Liu, China economist with Capital Economics, said in a note to clients. “While export growth is likely to remain relatively strong on the back of buoyant external demand, capital spending growth is set to slow in the second half of 2017 as base effects turn less favorable.”
Government Forecast
Growth in the first quarter was better than expected amid strengthening global demand, the government said in the statement. It kept its February prediction of 2 percent to 3 percent economic expansion this year, faster than the 1.9 percent gain last year.
“There is upside to the forecast if the global economy continues to improve and the downside risks do not materialise in the period ahead,” the statement said.
Economists forecast 2.1 percent growth for 2017, according to the median estimate of analysts surveyed by Bloomberg News.
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