Developers saddled with HK$1.3 billion in mortgage receivables following home loan push

Hong Kong developers have added an estimated HK$1.3 billion in mortgage receivables to their accounts by providing first and second mortgages for the first time in a decade to help boost sales, according to analysts.

Facing fierce competition amid a tightening of mortgage policies, a growing number of developers have been skirting bank regulations by providing home loans of up to 95 per cent of the purchase price through wholly owned financial institutions to lure buyers.

“Nowadays most projects launched come with a first or second mortgage option funded by developers themselves. The range of loan-to-value (LTV) ratio on offer has increased to 80 to 95 per cent,” Barclays property analyst Paul Louie wrote in a research report.

They began offering mortgage loans after the maximum loan-to-value (LTV) ratio for bank mortgages for self-use residential properties with a value below HK$7 million was lowered from 70 per cent to 60 per cent in February last year. That meant home buyers needed to make a 40 per cent initial down payment, up from 30 per cent, when purchasing an apartment.

Among the five project launch sales studied by Barclays, it noted 22 to 90 cases of homebuyers taking up developers’ mortgage offers at Kerry Properties’ Bloomsway in Tuen Mun, Henderson Land’s Zutten in To Kwa Wan, Cheung Kong’s Yuccie Square in Yuen Long and Wheelock’s Capri in Tseung Kwan O.

Henderson Land’s Eltanin Square Mile in Mong Kok, however, recorded 118 cases, or 42 per cent of the 279 units sold.