Land of plenty
Now may be a good time to buy but money is tight and banks are becoming more cautious about lending
Good property deals may be easier to secure in coming months as prices are set to plummet further. But buyers may find mortgages increasingly difficult to secure as banks across the board are cautious about lending.
'Getting a mortgage is becoming harder and that is keeping end users away as banks are now much more cautious about lending money,' said Marcos Chan, Jones Lang LaSalle head of research for Hong Kong. 'Every bank is cautious about property valuation and every cent they spend.
The issue at stake is not so much mortgage rates but the reduced loan-to-value ratios and conservative valuations.
Colliers International executive director for residential sales Ricky Poon said: 'All the banks have tightened their lending. Where they would once have lent 70 per cent [for a mortgage], banks are now lending just 50 to 60 per cent. They are really playing it safe and are bracing for lower property prices.'
According to Irene Chow, senior vice-president and Greater China equity strategist at Credit Suisse Private Banking division, since the end of June, the Centa-City Leading Index, which tracks the movement of residential property prices in Hong Kong and is set by Centaline Property Agency, has fallen by about 10 per cent.
'In the year to date, the index is down to minus 1 per cent which means this year's entire gains have been wiped out,' she said.
A heftier down payment at a time when people are trying to tighten their belts anyway is enough to deter prospective buyers from closing a deal.
Mr Poon said: 'Even if buyers come across a good deal, they might not be able to borrow enough money.'
The credit squeeze could also affect several developments close to completion, including Bel-Air No8 in Cyberport.
'Existing purchasers may lower their sale price in order to get rid of their property. With bank valuation now lower, the seller would rather break even on their down payment and get out of the deal,' Mr Poon said.
HSBC's recent decision to raise rates for newly approved residential mortgage loans by 50 basis points to range between 3.25 per cent and 3.5 per cent to reflect the increase in interbank rates is expected to affect some potential buyers.
Ms Chow said: 'HSBC's decision to raise mortgage rates for new homebuyers may be a deterrent for people looking to buy properties now but it will have no impact on existing mortgage borrowers.'