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Kenneth Ko

The full extent of the downturn in the property market was brought out yesterday after the Hong Kong Monetary Authority revealed mortgage lending dropped 36 per cent last month, having fallen 14 per cent in November.

 The authority described the decline as 'significant' and said prospects for a rapid recovery in the sector were 'subdued', a sentiment echoed by most property analysts.

 Figures show gross new loans during December tumbled by 36.2 per cent to $9.76 billion after a 14.4 per cent fall for November.

 In number terms, 5,253 gross new loans were made, down sharply from the previous month's 8,343.

 New loans approved in December decreased by 29.8 per cent to $8.39 billion, reflecting the continued sluggish market, the HKMA said.

 This compared with a 45.6 per cent fall for November.

 Loans approved but not yet drawn in December fell by 38.2 per cent to $5.32 billion.

 'Given the continued decrease in undrawn lending commitments and the current market conditions, the outlook is for lending activity to remain subdued,' HKMA deputy chief executive David Carse said.

 The amount of outstanding mortgage loans increased by 0.44 per cent to $425.4 billion, taking into account the $2.2 billion mortgage loans sold and securitised with the Hong Kong Mortgage Corp.

 In November, the outstanding loan amount grew by 1.2 per cent.

 The dramatic decline in new mortgage lending was not a surprise, considering the 52.7 per cent plunge in property activity to 7,305 transactions, the bulk of which were for residential properties, last month.

 Analysts said the contraction in property activity was largely caused by banks' tightened credit policy in the face of falling residential prices.

 Higher mortgage rates and a lower-than-usual valuation policy adopted by banks stalled both primary and secondary market trade, analysts said.

 With interbank rates likely to remain high and volatile, banks would remain reluctant to extend mortgages in the near term which would dampen further property and mortgage activity, analysts said.

 The annualised rate of growth of outstanding loans in the three months to December fell to 9.9 per cent from 20.6 per cent in November. The average change in the past year fell to 28.3 per cent from 31 per cent in November.

 On the pricing front, mortgage rates continued to harden in December, the HKMA said.

 More than half of new loans were priced at one percentage point or more above the best lending rate.

 Gross loans for the purchase of properties in the mainland increased to $282 million in December from $271 million in November. The amount of outstanding loans increased by 1.65 per cent to $7.9 billion.



High rates prompt 36pc fall in mortgages