Mortgages in Hong Kong to drop this year, says consultant
Loans are expected to fall significantly in line with a decline in the number of property sales
The number of mortgages in Hong Kong will drop significantly this year following the Hong Kong Monetary Authority's (HKMA) further tightening of home lending, according to mortgage consulting firm mReferral.
"Property sales are likely to drop and that will affect mortgage activity in the fourth quarter," said Sharmaine Lau, chief economic analyst at mReferral Mortgage Services.
Lau expects new mortgages to drop about 25 per cent to HK$171.3 billion, the lowest level since 2007, according to mReferral.
Hong Kong's de facto central bank last week announced measures to make it harder to get a mortgage for a second home.
The announcement by Norman Chan Tak-lam, chief executive of the HKMA, came on the heels of the US Federal Reserve's unveiling of a third round of quantitative easing measures to provide liquidity and keep US interest rates low until 2015.
Under the new measures, borrowers who already have more than one mortgage can borrow a total of up to only 40 per cent of their monthly income, down from the typical 50 per cent.
Property buyers from outside Hong Kong with more than one mortgage are now subject to a lower loan-to-property value ratio ceiling.
Up to 40 per cent of new mortgage borrowers in the past 12 months in Hong Kong already had a mortgage, according to the HKMA.
The HKMA also capped the repayment period on all new mortgages at 30 years. Some banks now offer 40-year mortgages.
The authority last clamped down on home lending more than a year ago.
"When the HKMA announced tightened lending measures in June last year, property sales dropped sharply, " Lau said.
According to mReferral's estimate, there were 108,790 transactions last year, down 33.2 per cent from 2010. Total sales value in 2011 dropped 17.1 per cent year on year to HK$571.4 billion.
Lau expects history will repeat itself.
She said the number of property transactions would drop this year, and as a result mortgage activity would also decline.