Bigger loans for village homes
These houses are now included in the HKMC's 85 per cent mortgage scheme, but experts do not expect a flood of buyers
A relaxation of the lending policy for village houses will help interested buyers enter the market more easily, but banking and property experts do not expect a sharp jump in transaction volume and prices.
They said complicated land ownership and poor control of building quality continued to cloud the sector's outlook.
The Hong Kong Mortgage Corporation (HKMC) last week included village houses in its mortgage insurance programme, which enables buyers to get up to 85 per cent mortgage loans.
The move is seen as a breakthrough as buyers of village houses could previously get loans of only 50 per cent to 70 per cent.
HKMC senior vice-president Kenny Fok Tsz-chun said several banks had approached the corporation over the past few months to ask that the mortgage insurance programme be expanded to cover village houses.
'After consultation with our approved reinsurers, the corporation decided to expand the scope so as to enable high loan-to-value financing to be made available to potential homebuyers interested in acquiring village houses,' he said.
Immediately after the new arrangement was announced, Bank of East Asia and DBS Bank said they had joined the programme.
The Bank of East Asia is offering buyers of village houses mortgages at interest rates as low as 2.25 percentage points below prime. Loan terms are for up to 30 years, the same as for typical apartments in housing estates.
DBS Bank is also offering village homebuyers a rate of 2.25 percentage points below prime. Buyers are also offered another option at 1 percentage point above the Hong Kong Interbank Offered Rate. Loan tenures are up to 40 years.
Derek Chung Siu-kuen, DBS Bank's head of mortgage and secured loans, said the village house market had been underserved in the past.
The 85 per cent mortgage programme would help buyers of quality village homes get finance more easily, he said.
Ricacorp Properties managing director Ivan Ho said: 'A growing number of local young couples fancy village houses. However, they cannot afford the 30 per cent to 50 per cent down payment.'
The relaxation of the lending policy would help these people to own properties, he said.
The value of village house transactions last year reached $2.58billion on 2,070 deals, compared with $2billion on 1,764 deals transacted during 2004, according to Centaline Property Agency statistics.
Financial lenders said not all village houses would benefit from the new policy.
Centaline Finance director and general manager Hendrick Leung Lee-chung said large-scale village house developments and quality houses would easily secure financing, '[but] marketability is a major concern'.
Mr Lee said the market for village houses was small, and it was difficult for banks to look for new buyers for properties repossessed from borrowers who had failed to repay their loans.
He said some banks remained conservative in lending money in the market due to complicated land ownership issues, especially for small houses owned by indigenous men in the New Territories.
Under the small-house policy, all male villagers in the New Territories who can trace their village roots back to 1898 will be given land to build a three-storey villa of up to 2,100 square feet in total floor space. The policy was initiated in 1972.
But not all village houses are small houses. And anyone can buy public or private land to build houses for resale purposes.
Peggy Tam Lai-king, head of mortgage lending at Hang Seng Bank, said the bank had no interest in aggressively expanding into this market due to its small size. The bank provides 60 per cent mortgages to buyers of village homes.
Mr Chung of DBS Bank said that, although the bank had joined the HKMC's 85 per cent mortgage programme, it would adopt a prudent policy when it came to selecting clients.
'We will only provide mortgages for quality and popular village houses,' he said.