Mortgage rule changes to ease price of homes
HKMA action may affect younger buyers and investors seeking a second flat, say analysts
The Hong Kong Monetary Authority's tightening of requirements for a second mortgage will discourage investors and slow down the growth in home prices, property agents and analysts say.
Patrick Chow, head of research at Ricacorp Properties, said the measures could deter investors who rely on bank loans.
"We see increasingly cases of several people joining together to invest in mass homes, which involve a smaller lump sum payment. More difficulty securing mortgage loans will drive them away from the investment market," he said.
Chow said sales at popular housing estates such as Taikoo Shing and Nan Fung Sun Chuen in Quarry Bay would drop, and prices would follow.
Standard Chartered analyst Kelvin Lau said in a research note that as borrowing costs rise for buyers with multiple mortgages and for investors from outside Hong Kong, the immediate impact would be fewer home sales.
Younger homebuyers with limited capital who planned to take out loans of a longer duration may also be discouraged.
"We also see a likely cooling effect on property prices; however, it remains to be seen whether this will be enough to defuse medium-term upside price pressure - especially in view of the perceived supply shortage, still ample liquidity, and strong domestic and cross-border fundamentals," Lau wrote.
The HKMA announced yesterday that mortgages for homebuyers who already own at least one flat and are applying for a loan for another flat will be limited to a term of no longer than 30 years. Also, the mortgage-to-income ratio will be cut to 40 per cent from 50 per cent.
For mortgage applicants whose principal income is derived outside Hong Kong, the maximum loan-to-value ratio will be reduced by 20 percentage points from the ratio local buyers enjoy.
This means a mainland buyer who applies for a mortgage on a HK$10 million flat will be allowed to borrow only up to 30 per cent of the home's value, instead of 40 per cent previously, so he or she will need a down payment of at least HK$7 million. A local buyer would be able to borrow up to 50 per cent, or HK$5 million.
Properties for self-use are not restricted, and the measures take effect immediately.
"It is a preventive measure to keep investors from taking on too much debt," said Wong Leung-sing, senior research director at Centaline Property Agency.