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Local property market observers are unclear about the future of Hong Kong real estate as prices dipped and sales slowed in the second quarter. Analysts blame negative influence stemming from the struggling global market as well as the threat of a housing bubble looms, caused by low interest rates that have attracted a wave of Chinese buyers. The Hong Kong government has proposed numerous measures to help avoid the bubble such as restricting purchases to Hong Kong residents, but it remains to be seen whether that would help stabilize the market. For more on this continue reading the following article from Property Wire.

Property prices in Hong Kong grew at a slower pace and sales fell in the second quarter as global stock markets weakened, the latest figures show.

However, the city's financial chief John Tsang warned that the risk of a housing bubble will remain as long as interest rates stay low as market sentiment has moderated in the past two months after a sharp rebound in February.

In May, prices grew by less than 1% and in June registered transactions fell by 30% to 5,890, but Tsang said the direction of the real estate sector was still unclear.

‘The property market...is under the influence of the weak external economic environment and ultra low interest rates and it's difficult to predict its future direction. But as long as the low interest rate regime remains unchanged, the risk of the property bubble remains,’ Tsang explained.

Low interest rates and a flood of buyers from mainland China have pushed up Hong Kong real estate prices in recent years. Prices have soared 94% over the last five years, according to Knight Frank.

Hong Kong's new leader Leung Chun-ying has proposed a number of countermeasures, including selling land for developments that would be restricted to Hong Kong residents only.

Also, the risk of a sharp correction in the city's property market has grown as Europe's debt crisis deepens and as the global economy sputters, reducing demand for goods from China and Hong Kong.

The uncertain economic environment may have also dampened developers' appetite for new projects.

Meanwhile in mainland China home rentals saw a 2.2% year on year growth in May, according to the National Bureau of Statistics. The average home rental in 10 major cities witnessed an 8.4% growth, according to China Index Academy. The average rental in Chengdu grew 14.9%, while Beijing saw a 13.9% increase.

The data also shows that Shanghai's rents rose 6.5% in May year on year. In some popular areas for tenants, monthly rents increased up to 30%, according to a property agency. The average rental for second hand apartments has increased for six consecutive months since the end of 2011.

Despite the fact that Shanghai launched a public rental housing scheme in 2012, which was expected to cool rocketing housing prices in the city, statistics show that it has had a limited effect because it covers the housing needs of only few residents.

China invested RMB507 billion in government subsidised housing in the first half of this year, according to the Ministry of Housing and Urban Rural Development. In the first six months of 2012, local authorities began constructing 4.7 million affordable housing units, compared to 3.46 million units in the first five months.

It means that to date, 2.6 million affordable housing units have been completed, just over half the five million unit target set by the government for the end of 2012.

The government plans to start construction on at least seven million units this year. China has vowed to build 36 million affordable housing units during the 2011/2015 period in a bid to meet the demands of low income families and cool the property market. Construction on 10 million units began last year.

This article was republished with permission from Property Wire.