Gov’t considering new measures to cool property market

The government has warned of further inflationary pressure and the formation of a property bubble due to the US’s launching of its third round of quantitative easing (QE3), and disclosed that the authority is studying new measures to counteract rises in food and property prices.
Three weeks after the US announced its QE3 intended to stimulate the property market and consumer spending, the Macau SAR Policy Research Office released a report analyzing QE3’s possible impacts on Macau’s economy and the viable countermeasures.  
Lao Pun Lap, Coordinator of the Office said in the report that while QE3 will not have much influence on Macau’s Inter-Bank Offered Rate which is virtually at zero, the monetary easing is expected to further the depreciative trend of Macau’s currency, which is pegged to the Hong Kong dollar and therefore indirectly to the US dollar.

Lao said the pataca’s depreciation means higher prices for imported products and therefore a higher inflation rate. The effects are similar to the QE1 and QE2 launched separately in the past 4 years. The report said that although the lower exchange rate makes Macau’s products and services more attractive towards foreign buyers, the rise in demand will also drive inflation and asset prices further upwards.

To prepare for possible fluctuations in capital flow and the overheating of the real estate market under these kinds of “extremely unusual” conditions in the international financial market, the report said, “The government will continue to closely watch the macro-economic and financial data as well as cross-boundary capital flows”. Similarly, the Taskforce for the Promotion of Sustainable Growth in the Real Estate Market will also continue its monitoring of the property market.

The report said due to the fact that a certain extent of overheating still exists, the Taskforce has already begun studies in four related areas for the possible reinforcement of established measures or the launching of new measures in response to the changes in the real estate market. The areas of research include mortgages, taxation, sales of uncompleted units and the speeding up of approval procedures for construction projects. 

The Policy Research Office made three suggestions to the government to offset the possible impacts on inflation and property prices. In view of the fact that the main driving force behind inflation are the price hikes on food and non-alcoholic beverages, the report recommended the authority announce new measures to help the general public cope with the associated livelihood problems created by inflation.

Secondly, the report recommended that the government reinforce the work of the Taskforce for Food Prices in exposing and dealing with the irregularities and illegal practices in the food import and supply chain, as a measure against price fixing. Thirdly, the Office noted that the Monetary Authority is studying the possibility of raising the LTV ratio to make it costlier for speculators. The report also pointed out that the Taskforce for the Promotion of Sustainable Growth in the Real Estate Market should study the feasibility of launching a new round of measures to cool the market in response to the latest developments created by QE3.