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Billy Adams

HONG KONG'S controversial mortgage ceiling, implemented to help cool surging price rises, is in danger of doing exactly the opposite, according to property consultants A. G. Wilkinson & Associates.

  Assistant director Michael McGuire said his firm had supported the ceiling, but now felt changes must be made.

  ''We can only support it up to a limit,'' he said.

  ''That limit, if it is already not here, is certainly fast approaching.

  ''They set out to stop speculation in the residential market.

  ''I believe they are now in fact achieving the opposite of what they planned. The Government is fuelling speculation, not stopping it.''   Mr McGuire said speculators were now making moves back into the market.

  Instead of keeping investors keen on making a fast dollar out of the sector, the 70 per cent ceiling was causing more to move in, anticipating an eventual relaxation of the ceiling and a rush on the market.

  According to Mr McGuire, that was already driving prices up again in the mass residential sector.

  The Hong Kong Monetary Authority said the ceiling was based on what people could afford..

  Li Kwong-fai, head of banking supervision, said: ''So far, I have not seen anything about the possibility of relaxing the 70 per cent limit.

  ''It is purely a guessing game being played by developers and buyers. It's one-sided guessing.''   People buying homes are now having to make a 30 per cent down payment because the top bank mortgage is 70 per cent.

  The Government, which introduced the guidelines nearly two years ago to try to stop speculation-driven price rises, is showing no sign of relaxing the rules.

  Some banks have imposed their own stricter cut-off lines. The Hongkong Bank will not supply more than 60 per cent finance for homes costing more than $5 million.

  The Hongkong Bank and the Hang Seng Bank have also lowered the preferential ceiling for civil servants from 90 per cent to 70 per cent.

  A strong sign that the market was active again came in June, when the number of home loans taken out jumped 47 per cent from $7.66 billion in May to $11.2 million.

  According to property consultants Vigers, mass residential prices were moving again after a period of stability. In the first six months of this year, they rose by up to 10 per cent.

  Mr McGuire said: ''I'm not happy about some of the financing arrangements.

  ''These are leading people to believe they should be speculating.

  ''People are moving in who anticipate that at some point these rules will be relaxed and there is only one way the market will go when that happens. That is up.

  ''Medium-term investors with a bit of cash in their pockets are the ones who will gain.

  ''If nothing is done soon, when the restrictions are lifted, I believe there must be an increase in the number of buyers, and there is bound to be a considerable increase in prices.''   Mr McGuire urged a phased relaxation of the guidelines, starting with a scheme to help first-time buyers.

  Banks should concentrate on giving this group a chance to buy homes in the secondary market, not new developments that the speculators were interested in, he said.

  ''The speculators are the ones who can afford to sit, wait and anticipate what is going to happen,'' he said.

  ''But the poor old end-user has to wait until something actually happens.

  ''The Government and banks have got to come out with a rational policy which will enable end-users not to be left up in the air waiting on a breakthrough.''   People were in the dark as to what would happen, and when, he said.

  Mr Li said the situation would be much simpler if a scheme could be devised to differentiate between genuine first-time buyers and speculators.

  Michael Green, an analyst at SG Warburg (Securities), said he believed the level of speculation in the mass residential market was ''very low''.

  Many people invested in flats because they were a good hedge against inflation and were more financially viable than keeping assets in bank accounts.

  SG Warburg predicted rises of between four and 10 per cent in the mass residential market this year.



Sharks set to rush market