THE news that a Hong Kong property developer is offering up to 100 per cent home loans for nine of its residential developments sounds too good to be true. Soaring property prices, combined with a government-initiated 70 per cent ceiling on most mortgage loans by banks, have combined to shut many ordinary people out of the market. The idea of home ownership has, for many people, moved from the realm of ambition to that of fantasy. Borrowers should beware that property developers, while happy to appeal to the dreams of would-be home owners, operate their business in a more down-to-earth manner. When property prices are rising, few developers offer 100 per cent loans, or other inducements to facilitate a sale. They do not expend huge amounts of money on advertising the bargains they are offering. They merely announce a sale date, and let would-be home owners, the speculators and the men in white gloves queue outside their offices. Offers such as the 100 per cent home loans being offered by Nan Fung Development do not signal that the time has come for ordinary people to get on to the property bandwagon. On the contrary, they signify that developers are having trouble finding buyers, and that - despite what they may say for public consumption - they probably are not expecting an early upturn in the residential market. Developers have grown so rich on the back of soaring property prices that they are not so much fat cats as grossly obese ones. It is not entirely surprising that a cash-rich developer should choose to use some of its funds to get empty apartments off its books. However, the kinds of borrowers who cannot afford a 30 per cent down payment on an apartment are the kind of borrowers banks like to avoid. Nan Fung says it is looking for high-income earners who either have insufficient savings or are not prepared to pay a large deposit. The former will normally be either irresponsible with money or subject to heavy financial commitments, while the latter - having paid no deposit - may intend to walk away from the deal if the property market slumps. Nan Fung's offer does not appear likely, at this stage, to lead either to a rash of similar commitments by other developers, or to help send property prices soaring again. It appears no more than one company's short-term solution to a slump in demand. However, such solutions expose developers to new risks, and could serve to undermine government attempts to halt runaway property prices.
