These need to be compared against the significant economic and financial damage that could result from a housing boom that ends in a severe housing downturn. In the pre-GFC housing boom, with hindsight and with this macro-prudential framework, we would most likely have applied macro-prudential instruments with the aim of reducing systemic risk.
In the current situation, with house prices and household debt ratios starting from much higher levels, and with interest rates at historically low levels, the risks to financial stability may well be greater. References Craig and Hua (2011), “Determinants of Property Prices in Hong Kong SAR: Implications for Policy”, IMF Working Paper, 11/277.