ARE banks making the right decisions by relaxing their mortgage policies now? While the question can be answered only with hindsight in a year or so, the deciding factor is whether banks relax due to a herd instinct or out of confidence in the property market to withstand future shocks.
No doubt property prices have gone down somewhat since their peak, and transaction activities have begun to pick up.
Yet uncertainties abound. The persistent rumours on Deng Xiaoping's health, the never-dying doomsday sayings that the property bubble will burst some day, and worries about the unpredictable Chinese economy, have stubbornly refused to leave the market.
The fluctuations in the Hong Kong dollar versus the US dollar and volatility in the money markets point to the nervous mentality of market participants.
Apart from some confidence-boosting remarks from major property developers, property prices have not come down to a really affordable level. If they had, there would be no reason to extend the repayment period.
By extending the pay-back period from 20 years to 25 years, banks are tempting those would-be home owners on the brink of buying to jump into the market.
