Typically as the inflation accelerates, rents are the next to move up. Although US rates are rising they are lagging accelerating inflation. China's inflation is raging as well and they have not raised rates yet either. Hence HK rates have lagged US rates in rising, even as deflation turns to inflation in HK. So locals and PRC nationals have all been pushing prices higher. However, on the margin, people looking to come to HK to work and live (expats and PRC nationals) or just looking to move out of their parents 900 sq ft apt, and now priced out of the buyers mkt, look to rent.

This lagging of rents has serious implications on US inflation indexes going forward. One of the reasons US CPI was low these past few years was that the availability of low mortgage rates encouraged people to buy rather than rent. So rents, which are the measured component in the US CPI for both rent and house prices, were pushing inflation DOWN even with house prices rising. Now that rents are beginning to rise, the downward influence is about to reverse, sending CPI higher even as interest rates rise. Henry Kaufman, in his autobio. notes how Paul Volcker was shocked when he kept raising rates ever more aggressively but the CPI kept climbing, non-plussed. Volcker had to really hit the brakes hard to get inflation under control.

And once again, real rates almost everywhere are neutral to negative ie short term rates are BELOW the inflation rate. Could we see Greenspan more aggressive after the election in the US?

speaking impartially, i think everyone should rush out and buy property immediately, in particular i think flats of about 500 sq ft in or around kennedy town are excellent value.

Giles talking his book?