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  • Dec 18, 2014
  • Updated: 2:01pm
PropertyHong Kong & China

Mortgage loan curbs to stay until home prices fall, HKMA chief Norman Chan says

Home values remain stubbornly high despite six rounds of Monetary Authority cooling measures

PUBLISHED : Monday, 14 July, 2014, 11:40pm
UPDATED : Tuesday, 15 July, 2014, 8:00am

Six rounds of mortgage tightening by the Hong Kong Monetary Authority since 2009 have reduced lending but not reined in prices, the latest figures show.

The average loan-to-value ratio of new residential mortgage loans has dropped to 55 per cent, from 64 per cent in September 2009 before the first round of measures was introduced, Hong Kong Monetary Authority chief executive Norman Chan Tak-lam said yesterday.

The figures show the growth in mortgage loans has been brought under control
HKMA CHIEF EXECUTIVE NORMAN CHAN

But the Centa-City Leading Index, which tracks secondary market prices at major housing estates, shows home prices rose 66.8 per cent between the start of September 2009 and the end of last month.

Chan, in an article posted yesterday on the website of the city's de facto central bank, wrote that since the second quarter of last year mortgage loan growth calculated on a yearly basis has shrunk to 4.2 per cent from 8.7 per cent in 2010.

"These figures show the growth in mortgage loans has been brought under control, especially since the introduction of positive mortgage data sharing in 2011, which plugged previous loopholes for concealing outstanding mortgages to secure more bank loans for speculative purposes," Chan said.

He acknowledged that the market cooling measures had been likened to "spoiling the party by taking away the punch bowl", but said they helped safeguard banks by defending them from risks in a market downturn.

The measures would remain in place until property prices fell, Chan said.

Ben Kwong Man-bun, the head of research at KGI Asia, said the HKMA policies had failed to lower home prices because interest rates remained low and supply and demand remained out of balance.

"Property prices are likely to remain high and the HKMA has done the right thing to curb bank property lending to prevent them from taking on too high a risk," Kwong said.

The HKMA began tightening up on mortgages after hot money started flowing into the city following the United States' adoption of a monetary easing policy, which boosted local stock and property prices.

In the sixth round of measures, introduced in February last year, banks were told to test borrowers' ability to repay mortgages on the assumption that interest rates would go up by 3 percentage points.

Earlier rounds were aimed at luxury purchases and made it harder for people to get a mortgage for a second property.

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This article is now closed to comments

536cf8d0-ac6c-4b8b-ba9c-52bc0a3209cb
the hong kong government should introduce measures that REALLY work. the group at concern is the middle-class people. whether the loan value was brought down or not, they are unable to afford housing. this is a FACT. by limiting the loan value, it is making it even harder for them to own a house but it does not affect the rich people. so by this measure, it is actually punishing the middle-class.
pjp
Sitting on the fence here, the extraordinary price increases over the past several years are entirely man made. You can't tell us that your average saver was expecting 100% gain over 2 years can you?
Please be realistic and look at the big picture, the huge increase in prices was entirely made by the governments around the world. You can't have it both ways and now say the government should not interfere.
OC2S
Cooling the market is very different to making prices "fall" and destroying peoples wealth (ie equity) they have built by investing in the home they are living ... is this the real role of the quasi central bank?
After running years of negative real interest rates and destroying the value of ordinary peoples bank account savings these latest comments from the HKMA are breathtaking ... blaming the US for running an expansionary monetary policy and then on the other hand doing nothing about addressing the key issue in our own economy (ie the currency peg) is just unbelievable. Unfortunately and as we have come to expect it is the ordinary people that are paying price for the inaction and incompetence of this type of leadership.
jandajel
More importantly, why should the government be trying to make them fall?
HK_eh!
agree with most comments, it's not about causing prices to fall but to limit the size of the property bubble to continue to grow.
that is the issue with the FED, they make bubbles and constantly say you can't see it coming.
These policies should be to limit risk, not to cause property crash.
blue
Also Singapore's elections are as rigged as they get. :-) Hong Kong has a more democratically elected legislature than Singapore.
ckretowicz
Can somebody tell me who owns most residential properties in Hong Kong, large scale speculators or ordinary residents, if the latter lowering value of their homes and investments for the future equals robbing them and punishing for hard work and prudence. It happened in history many times and in many places, with similar miserable or tragic results. Is this what HKMA is aiming for?
lamlm38
Property price in Singapore has fallen more than 10% this year with similar cooling measures.. he only difference is in SG they have direct elections which makes their gov more responsive no doubt :)
mcheung
Direct elections doesn't solve all these livelihood issue, while it may help. It is the result of the Overpaid, Arrogant, and yet Incompetent, government officials who colluded with the Rich and Powerful.
535aea67-f740-4042-ae89-35060a320969
Developers,property owners, tycoons VS Hk gov't and middle class or taxpayers? who do you think will win on this head on head battle to buy a reasonable price of property?

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