THE chairman of Hongkong and Shanghai Bank, Mr John Gray, has called for a wait-and-see approach to the restricted residential mortgage lending policy, but issued a veiled warning that a prolonged delay could create its own problems. Likening the market to a supertanker which takes a long time to turn around, he said prices had come down and suggested that affordability ratios had reached reasonable levels. Despite the 70 per cent ceiling on residential mortgage lending introduced by the Hongkong Association of Banks at the behest of the Government in November 1991, it was not until the second half of last year that the impact was felt, he said. There had since been a ''healthy'' correction in the market, resulting in price falls of 10 to 15 per cent over the past few months. However, on the question of whether prices would or should go down further, he said: ''I really don't know.'' He added: ''I would be concerned, of course, if they were coming down by 50 to 60 per cent, but they're not and I don't think they will.'' The Government already had the November figures showing the leading indicators in the direction of the property market, but was likely to want to wait at least another month before determining whether to relax the lending policy. ''I think they would probably want to wait until they got the December and possibly the January figures before they formed a view on this - equally with ourselves and the other leading banks in Hongkong,'' Mr Gray said. For the moment, as far as the bank was concerned, the 70 per cent policy remained in force, he said. Property prices, particularly in the residential sector, rose at rates of up to 50 per cent a year between the second half of 1991 and the first half of last year, rises which Mr Gray termed ''unsustainable''. ''So I see this levelling off as a correction, and a positive correction,'' he said. ''But it does mean that the asset values against which the banks are lending - and equally because of that the size of their own loan assets - are not increasing at the same rate as they might have been doing, for instance, in 1991.'' In fact, affordability ratios - the relationship between property prices and people's incomes - never reached the crisis proportions seen before the property crash of the early 1980s. ''Nevertheless, they were getting to an uncomfortable level, and they have come down,'' he said. Developers clearly wanted to shift their developments because that was the nature of their business, he said. ''And they're quite right when they point out that a 30 per cent down-payment on a new residence or apartment is something which most families in Hongkong find very difficult to sustain.'' That hefty down-payment was slowing the rate at which new developments coming on to the market were moved. ''But make no mistake about it, the genuine demand is out there,'' Mr Gray said. Hongkong was not in a position comparable to that in which the US and the UK found themselves in recent years, as most people in Hongkong did not have second and third homes on which they were paying mortgages. ''They're not buying things out of their annual bonuses which may not come up next year,'' he said. ''They've got families who move in and live there. There's always some speculation in the property market but, by and large, the lower-cost projects end up in genuine end-user hands.''
