Tightened mortgage lending has pushed Hongkongers into arms of cash-rich developers and their expensive property loans
- Developers woo buyers with financing plans that cover more of a property’s value than the maximum offered by banks
- Sales in Hong Kong’s secondary market have dropped by half since 2008
Squeezed out of owning an old home in the city by tightened mortgage rules, Hongkongers are increasingly buying smaller but more expensive new apartments. Unable to apply for an adequate mortgage from banks, they are turning to developers, who provide loans amounting to as much as 90 per cent of a property’s value, no matter what the cost.
Penny Li, 35, a finance professional, ended up buying a smaller and more expensive new apartment as she could not get a mortgage for an old home in a better location that she had her eye on. With an initial deposit of as little as HK$1 million (US$127,404), she secured a 530 sq ft home that costs HK$9.4 million.
The developer is providing 90 per cent of the mortgage. “If it were not for the extra loan offered by the developer, I could not have bought this home,” Li says.
Her original plan was to buy an old home close to work for a bit more than HK$9 million. But she needed 40 per cent of its value for a down payment under current mortgage rules.
“We always say Hong Kong’s housing issue is due to lack of supply. But what we did is suppress supply in the secondary market. We are self-contradictory,” says Joseph Tsang, JLL Hong Kong’s managing director and head of capital markets.