Lending tightened on luxury housing
Rising housing prices in Hong Kong have spurred the government to introduce measures to rein in growth by tightening mortgage criteria for home buyers and investors.
The Hong Kong Monetary Authority yesterday issued a circular to banks telling them to reduce the amount they lend to buyers of luxury homes from 70 per cent to 60 per cent of a property's value for homes priced at HK$20 million or more.
For properties valued at below HK$20 million, the 70 per cent loan-to-value ratio will be maintained, but the maximum loan amount will be capped at HK$12 million.
The banking industry regulator also called on lenders to be prudent when valuing properties as well as when calculating the affordability of homes for borrowers.
Meanwhile, the Hong Kong Mortgage Corporation said it would stop providing mortgage insurance for investors. It also reduce the maximum mortgage size from HK$8 million to HK$6 million, and from HK$20 million to HK$12 million for its various mortgage insurance plans.
The tightening measures come as Financial Secretary John Tsang Chun-wah is seeking a meeting with representatives of the Real Estate Developers' Association on Tuesday to exchange views on how to improve the land application list system.
An official said the finance chief would also express the government's concern about the surge in property prices and the transparency of property transaction information.
Prices of luxury homes have gained 41 per cent on average since the fourth quarter of last year, driven by low interest rates, limited supply and money flowing from the mainland, according to international property consultant CB Richard Ellis.
Mass-market flat prices have risen 27.55 per cent this year, according to Centaline Property Agency.
One of the measures being considered was shortening the time gap - sometimes as much as a month - between the sale of a flat and the public release of the transaction record. This would allow the public to more quickly confirm whether developers had actually sold their properties for the price they claimed.
Ministers plan to hold talks about distortions in the property market with developers and the Consumer Council.
The record-breaking sale of a duplex at Henderson Land's 39 Conduit Road for HK$439 million, or HK$88,000 per sq ft of saleable area, has raised eyebrows in the financial community in the past few days.
Another official said the government had taken the rise in property prices more seriously after mounting public concern about matter.
Chief Executive Donald Tsang Yam-kuen said last week that prices for luxury flats had been soaring, but as only a small number of people were buying such flats, the increase did not affect the general public.
But the latest figures from the Transport and Housing Bureau show the number of flats available for sale fell to 47,000 at the end of September from 49,000 at the end of June - the lowest level since records began in the third quarter of 2004.
The tightened lending measures were not aimed at cooling the market, but at reducing the risk to banks from lending for high-end properties, Monetary Authority chief executive Norman Chan Tak-lam said.
Banks were advised to consider a borrower's ability to make mortgage payments if interest rates rose.
Dr Billy Mak Siu-choi, an associate professor at Baptist University's department of finance and decision sciences, said the government measures would have some impact on investors who were not financially strong. But the impact would be modest as most high-end properties were not bought with mortgages up to the 70 per cent level.
