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If you can't afford a home in Hong Kong, don't buy one, says Financial Secretary John Tsang

Financial secretary deals cold, hard truth to aspiring homeowners after new cooling rules

John Tsang

If you can't afford it, don't buy it.

That was the stark message to potential homebuyers dished out by Financial Secretary John Tsang Chun-wah yesterday. Meanwhile, Chief Executive Leung Chun-ying said the measures were needed to protect the city's financial system should interest rates rise.

Tsang's comments came as buyers reeled from the latest blow dealt by the Hong Kong Monetary Authority, which on Friday issued new rules that make it harder to buy homes costing HK$7 million or less.

"The most important thing is to assess your own affordability - not only looking at the affordability at the moment but for years to come," Tsang said after an interview with RTHK yesterday.

"If it is not affordable, then don't buy a property."

On Friday, HKMA chief executive Norman Chan Tak-lam announced new mortgage-tightening measures, which mean buyers will have to foot a bigger down payment before getting a loan.

The loan-to-value ratio for mortgages on residential properties costing less than HK$7 million is capped at 60 per cent, down from the previous range of 60 to 70 per cent.

Effective immediately, the measures are the seventh move since February 2013 intended to cool the soaring property prices, which have reached an all-time high amid inflows of capital and historically low interest rates.

Yesterday, Tsang said Hongkongers should assess their long-term financial prospects before buying. Prices could be influenced by factors such as interest rates in the United States, he said.

Because the Hong Kong dollar is pegged to the US currency, US interest rates dictate the cost of borrowing in the city, and have been tipped to rise this year as the American economy picks up.

"The government will … monitor the property market closely and, if necessary, roll out other measures," Tsang added.

Leung said the rules would help maintain the stability of the financial system and avoid a repeat of the market crash in 1997 during the Asian financial crisis.

"The super-low interest rates won't stay forever," he said.

"When European countries and the US change this policy, Hong Kong will raise its interest rates as the world will do.

"Those who have signed purchase contracts under the present low interest rates may not be able to afford the higher borrowing costs at that time. This will … affect … the stability of our financial system."

This article appeared in the South China Morning Post print edition as: Can't afford a flat? Then don't buy it, says Tsang
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