Price rise fear as Legco debates mortgage role
Democratic Party legislators yesterday raised fears that the government's proposal to set up a mortgage corporation might spur property price rises and disadvantage home-buyers.
The corporation, first announced in the Budget, was the focus of debate yesterday during a briefing by Hong Kong Monetary Authority (HKMA) chief executive Joseph Yam Chi-kwong to the Legislative Council's financial services panel.
Some legislators expressed concern that the greater liquidity in the secondary mortgage market created by the corporation would boost property prices.
HKMA officials said property prices might be 'indirectly' affected, implying they might go up.
Democrat Martin Lee Chu-ming asked for more information on the corporation and questioned whether the government's proposal was the result of pressure by big property developers aimed at ending the lull in the property market - which HKMA denied.
The briefing yesterday came after Mr Yam met the Preparatory Committee sub-group in mid-April.
The aim of the mortgage corporation is to buy residential mortgage loans from banks and fund them by issuing unsecured debt securities. An initial injection of $1 billion from the Exchange Fund will be used as the corporation's capital.
The size of the corporation's mortgage portfolio will be $20 billion, or about 6 per cent of the territory's outstanding residential mortgages.
Another Democrat, Dr Huang Chen-ya, who chaired the briefing, said he was not convinced by Mr Yam and that the mortgage corporation should be a private company.
'Why can't it be a statutory body where transparency is higher?' Mr Yam replied that a private company would operate more efficiently than a statutory body.
Its limited company status was designed to facilitate a future flotation on the stock market, HKMA officials said.
Legislator Eric Li Ka-cheung, representing the Hong Kong Society of Accountants, however, said he believed any impact by the corporation on the property market would be minimal.
'As a start-up [by the government] this is a good idea,' Mr Li said.
The basic premise behind the mortgage corporation is the estimate that a potential gap of $788 billion in mortgage financing will appear by 2005 as demand outstrips supply.
