China talks dash hopes on ceiling

Billy Adams

THE resumption of Sino-British talks has dashed hopes of the Government relaxing limits on mortgage lending, analysts have claimed.

Indeed, the fact that negotiations are to restart tomorrow appears to have boosted the property market.

Experts believe a successful outcome and an end to the 70 per cent ceiling at the same time would send prices spiralling again.

That is not what Financial Secretary Mr Hamish Macleod wants to see. The controversial guideline was imposed to cool down the overheated market.

Mr David Faulkner, a partner at Brooke Hillier Parker, was in favour of change.

But he expected the process to be a gradual one over a long period of time.

''The residential market is the most responsive to political and economic events,'' he said.

''The Government is concerned that, if there is a dramatic breakthrough in the Sino-British talks, there will be a very positive reaction in the property market.

''If the mortgage restrictions are lifted at the same time, we would undoubtedly see prices going up.

''It is really what the Government wants to avoid.'' Confidence was boosted by the announcement of the talks to take place in Beijing.

It was reported that the number of referrals to banks for mortgage applications had gone up as a result.

The Government introduced the 70 per cent ceiling for first-time buyers last year in an attempt to thwart property speculation .

It was brought in because investors had rushed into the market, pushing prices beyond the limits of many buyers.

Banks are not under any statutory obligation to abide by the guidelines.

Developers are desperate for the ceiling to be lifted.

It is now considering a number of proposals, including special schemes for first-time buyers.

Plans have been submitted by groups, including the Real Estate Developers' Association and the Hongkong Society of Real Estate Agents.

Mr Albert Cheok, executive director of banking supervision for the newly created Hongkong Monetary Authority, said he was unable to comment on the political side.

He said a monthly survey was analysed to decide whether the ceiling should be relaxed. Until now, that had not happened. The March study was being looked at now.

''It is a purely factual exercise. We look at the statistics and advise the banks appropriately,'' he said.

Hongkong's biggest property tycoon, Mr Li Ka-shing, is among those who have urged the Government to change its policy.

Mr Michael Choy, president of the Hongkong Society of Real Estate Agents, said the talks would not have a big influence on the market.

He said his group's proposals of mortgage ceiling relaxation for end-users would keep speculators and investors out.

Mr Faulkner said he expected the ceiling to be lifted eventually.

''I think it will be lifted in stages during the year,'' he said.

''Most people don't expect any dramatic outcome from the talks.

''The property market is at its most volatile in the spring and autumn.

''If there is no breakthrough in the talks and no change to the mortgage lending ceiling, there will not be any major movement again until the autumn.

''But, by that time, things may have changed politically.'' One analyst, who declined to be named, claimed too much importance was being placed on the ceiling.

He said people were often getting 70 per cent financing and added loans from developers and banks.

''Prices stopped rising because the market had gone up too quickly,'' he said.

''It was bound to stop at some point.''