Hk tightens lending to control soaring prices
In a bid to rein in property prices that have soared by 40 per cent since the beginning of last year, the Hong Kong Government has announced that the country's mortgage lending rules are to be tightened with immediate effect...
The recent sky-rocketing property prices across Hong Kong have been attributed to the surge in interest by mainland Chinese buyers, alongside mortgage rates which have been sitting at their lowest levels for two decades.
Now, in a bid to try and prevent a dangerous property bubble forming - and then bursting - the Hong Kong Government has announced it will tighten mortgage lending rules and increase the supply of land.
According to Hong Kong Monetary Authority Chief Executive Norman Chan, the maximum loan amount will be capped at HK$7.2 million for properties worth HK$12 million or less, meaning down payments will increase for any property valued above HK$10.3 million. Luxury homes in the city are defined as those costing at least HK$10 million, or bigger than 1,000 square feet.
Down payments for investment properties will also rise to 40 per cent and Hong Kong banks will be asked to apply 'stress tests' on mortgage rates rising above two per cent, Chan added. Mortgage borrowers' debt-to-income ratio should not be higher than 60 per cent when the interest rate increases by 200 basis points.
Financial Secretary John Tsang announced that the Government will also increase land sales from next year. The government will offer sites for auction next year in the Chai Wan, Hung Hom and Fanling districts, and will work with MTR and the Urban Renewal Authority to increase land supply. He had earlier reported that current home prices are approaching the level of 1997, the height of a previous bubble that was followed by a six-year slump.
"The basket of measures will have the effect of stabilizing prices," said Buggle Lau, Chief Analyst at property agency Midland Holdings Ltd.
Nicole Wong, regional head of property research at CLSA Asia Pacific Markets in Hong Kong said, "This is a serious attempt by the government to slow the growth in property prices.
"Maybe a lot of people still have HK$4.8 million for a down payment on a HK$12 million flat, but luxury is a leading sector and this is sending a message that this is serious," she said.
Leading analysts have warned the prices are set to rise by a further 10 to 15 per cent by the end of the year.
"We want to remind all potential homebuyers that the interest rate right now is at a very abnormal level and it is impossible for this to be sustained," Hong Kong Monetary Authority's Chan added.
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