Hong Kong’s monetary authority eases commercial property mortgage rules for the first time since 2009 as market cracks under recession
- The cap on loan-to-value ratio for non-residential properties will be raised to 50 per cent from 40 per cent from Thursday, HKMA says
- The new measure represents the first time the central bank is rolling back its market-cooling measures introduced during the 2009 market boom
The latest step will only apply to offices, industrial factories and retail premises, which have seen major price corrections as the economy shrank in four straight quarters through June. The city’s gross domestic product contracted 9.1 per cent in the first quarter, the worst on record as the pandemic took its toll, according to government reports. It shrank by 9 per cent last quarter.
“With business confidence continuing to be affected by the Covid-19 pandemic and the rising geopolitical tensions, non-residential property markets are likely to remain under pressure,” chief executive Eddie Yue Wai-man said in the statement.
Prices of such properties have slumped by 10 to 15 per cent between the recent peak in May 2019 and June 2020, the HKMA said. Prices for residential homes, however, have remained relatively stable during the period, depreciating by only by 2.7 per cent.
HSBC and Bank of China (Hong Kong), two of the largest mortgage lenders in the city, said the timely move will help support the economy.
“HSBC welcomes HKMA’s timely measures in response to changes in the non-residential property market cycle,” a spokeswoman said. “The bank will continue to work closely with relevant parties to support businesses in need.” Bank of China said the higher loan caps will lift confidence in the industry.
The HKMA decision, however, has drawn a mixed response from property market analysts amid the economic gloom.