‘Government is crazy’: increase in mortgages for first-time Hong Kong homebuyers will boost debt, limit cooling measures

A possible increase in the amount first-time homebuyers can borrow as mortgage may encourage people in Hong Kong to chase expensive property, further driving up prices in the world’s most expensive property market, analysts have said.

This comes after Paul Chan Mo-po, the special administrative region’s Financial Secretary, hinted on January 5 that the government was considering relaxing “loan-to-value” ratios for mortgages to help first-time homebuyers. But he did not say when this might happen. A loan-to-value ratio represents the percentage of a property’s value a homebuyer can borrow.

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The maximum loan-to-value ratio for homes worth between HK$7 million (US$893,069) and HK$10 million is 60 per cent, subject to a loan cap of HK$5 million. And through the Hong Kong Mortgage Corporation’s mortgage insurance scheme, first-time buyers can get as much as 90 per cent of an apartment’s value for homes that cost less than HK$4 million, and 80 per cent for homes that cost HK$6 million or below.

“The government is crazy. It is not helping people to get a home, it is pushing more people to chase high-priced assets with more debt on their shoulders. The concept is wrong,” said Nicole Wong, the regional head of property research at investment bank CLSA, who also questioned the timing of the suggestion.

“When prices pick up, who will benefit? Those who already have homes, and developers,” she added.

The prices of lived-in homes in Hong Kong have fallen by 7.2 per cent since August 2018, but are still 2.2 per cent higher than in January 2018, according to the city’s Rating and Valuation Department.