MORE than half of the homes in Hong Kong are virtually unsaleable because bank lending restrictions discriminate against older buildings, a property specialist has claimed. These same restrictions also caused the price of newly built premises to be artificially high, he said. Derek Larsen, a director at property consultants Brooke Hillier Parker, said residential buildings which were 20 years old or more were very hard to sell because of bank lending restrictions based on the age of a property. More than 50 per cent of the territory's housing fell into this category, he said. This created an unbalanced market where there was artificially strong demand for new properties while vendors for older homes were trapped with properties they could not sell, he said. Pamela George, external relations manager for Hongkong Bank, said the bank would not lend money on a property where the combined length of the repayment term and the building's age exceeded 30 years. This means that even when a mortgage is available on older homes, the repayment term is shorter. Mr Larsen said the effect of this policy was to make buildings which were 20 or more years old virtually unsaleable to the ordinary home buyer, who would find it too hard to repay a mortgage within 10 years or less. Most home buyers wanted at least 20 years to repay their mortgage, he said. Mr Larsen said the banks' lending restrictions were 'nonsensical' because 90 per cent of a building's worth was in its land value. 'Age means nothing . . . someone is going to pay a fortune for the land anyway,' he said. Brooke Hillier Parker is planning to conduct a survey on the ages of Hong Kong's residential buildings to find out how many do not fulfil the banks' age-based lending criteria. Mr Larsen said the situation was particularly worrying as the residential market was at a delicate stage following the Government's actions to cool house prices. Ms George said Hongkong Bank's mortgage lending policy existed because residents preferred to purchase homes in new developments rather than old properties. Many old buildings were also in poor condition, she added. Also, old properties were not an efficient use of land, Ms George said. Modern developments were able to house more people than old buildings. As a result, there was pressure to construct more new flats and houses to absorb the territory's expanding population. Mr Larsen said this policy artificially boosted prices of new developments. 'Someone, somewhere is trying to protect the value of their new buildings,' he said. United Democrats legislator Albert Chan Wai-yip said the imbalance in the housing market was the result of a 'close working relationship' between the developers and the banks. 'All the signals and the phenomena show that the banks' mortgage-lending policies are for the benefit of the developers of new flats,' Mr Chan said. 'We don't have any proof that there is a cartel of banks and developers, but it is clear that there is a very close relationship between the banks and the developers. 'The discrimination against older buildings will help the providers of new flats sell their properties.' The banks' policy also made it easier for a developer to buy older flats because vendors had difficulty finding anyone else to buy their properties, Mr Chan added. However, Mr Larsen said some owners of flats in old blocks could not sell even to a developer. If there were many individual owners in a building, it made it difficult for a developer to buy the property, he said. Siu Yu-wai, general secretary for the Real Estate Developers' Association of Hong Kong, denied the banks and the developers were working together to inflate prices for new homes and suppress the value of older properties. 'We [the developers] have been asking the banks and the Government to see whether the lending restrictions can be lifted for older properties, to take away the heat in the primary market,' he said.