Buy a luxury flat for only HK$1.2m downpayment? Henderson Land’s 95pc home mortgage scheme offered at Mid-Levels project
Henderson Land’s financing package likely the most aggressive on offer, according to one analyst
A luxury residential project in West Mid-Levels will only require buyers at presale to put down a 5 per cent initial deposit, or HK$1.2 million, for a home worth HK$24 million.
To drum up sales, Henderson Land Development is providing first mortgages for buyers of the Wellesley luxury development of up to 95 per cent of the flat value, according to a company release Tuesday. The project is due to be completed in October 2018.
The aggressive financing scheme highlights the extreme measures undertaken by developers to speed up sales at a time of slackening demand as banks tighten their lending policies to prevent a property bubble.
“It could be the highest loan-to-value ratio being provided by a developer for the luxury residential project for the past three or four years,” said Sammy Po, chief executive at Midland Realty’s residential department.
At present, most developers provide first mortgages of 80 to 85 per cent of the value of a home. Kowloon Development offered an aggressive package last year, raising the home loan ratio to 95 per cent for its small home development, Upper East, in Hung Hom.
Prior to the launch of the aggressive loan terms, Po said only 15 out of 90 flats at Wellesley had been sold since launch in January. The units, with sizes ranging from 978 to 1,023 square feet, are offered at HK$24 million to HK$43 million.
Henderson Land’s finance company is extending the loans with terms of up to 15 years under its “Perfect 330 Payment Method”.
For instance, a 1,023 square foot flat on the 6th floor will cost HK$24 million, or HK$23,500 per square foot. Utilising the full financing plan, potential buyers are required to put down a HK$1.2 million initial down payment.
Without the supplementary financing, buyers would need to fork out HK$12 million for an initial deposit, according to standard bank mortgage lending policy. Banks can only provide a mortgage loan of 50 per cent for flats costing HK$10 million or more for Hong Kong residents. For applicants whose main income is derived from outside of Hong Kong, the mortgage cap is 40 per cent of the value of the home.
For flats worth less than HK$10 million, the loan-to-value ratio is 60 per cent.
Jacinto Tong Man-leung, vice-chairman of private real estate investment firm Gale Well Group, said the marketing gimmick indicated developers would like to rekindle sales.
He said the existing lending policies have prohibited buyers from entering the market.
“Even high income buyers who can save HK$1 million a year will take 10 years to save HK$10 million,” he said.
Po said the aggressive lending could increase the risk of increasing negative equity cases if home prices dropped more than 5 per cent from the purchase price.
With citywide home prices on a downtrend since September, the incidence of negative equity - potential indebtedness when the market value of a property falls below the outstanding amount of a mortgage secured on it - is spreading quickly.
The Hong Kong Monetary Authority said last month that the number of negative equity cases had risen 14 fold to 1,432 in the first quarter of this year from the previous quarter – the highest number since the fourth quarter of 2011.