Caution required on help to buy Hong Kong homes
As flat prices climb, the government would be wise to think twice about offering mortgage assistance to those aiming to get on the housing ladder
The city’s red-hot property market shows no sign of slowing. The new year’s first property launch got off to a roaring start, as Sun Hung Kai Properties sold all 118 flats at its St Barths complex in Ma On Shan in just one day. This was followed by a second sell-out of another batch of 108 units a week later.
Market conditions today are especially worrying for aspiring first-time buyers and those without solid financing. Would-be buyers may be tempted to chase the market as they fret that prices will only become more unaffordable if they don’t take the plunge now.
But those who incur heavy debt in the form of a mortgage will also be the most exposed when the market experiences a correction. That is why the government must think carefully before launching any scheme to help first-time buyers to get on the path to becoming a homeowner.
Speaking on the sidelines of an international financial forum this week, James Lau, the secretary for financial services and the treasury, said it should be the right of every citizen to own their own home.
Luckily, he tempered that statement by saying any plan by the government to help young people and other first-time buyers to get on the ownership ladder must be thought through carefully.
The government-owned Hong Kong Mortgage Corporation is considering insurance to help those who do not have enough money to pay 30 per cent as an initial down payment. If enacted, this would mean helping them get 90 per cent mortgages.
The government and the corporation must approach this issue cautiously. While it is certainly desirable for those who want to own their own homes to have one, it is by no means a right or an entitlement.
Carrying a long-term mortgage over two or three decades is a huge commitment that may affect a person’s life in every aspect. The danger is that after a decade of abnormally low interest rates, the rate cycle has nowhere to go but up. Since most people secure variable rather than fixed mortgage rates, home ownership may be a high-risk proposition.
Last year, the average price of a new flat rose 16.9 per cent to a staggering HK$12.57 million from 2016 while the price of flats in the secondary market grew about 13 per cent.
If someone can’t afford to buy their own home, the government may not be doing them a favour by helping to burden them with a heavy mortgage.
The government’s wish to help aspiring homeowners is laudable, but it shouldn’t rush to lift the mortgage limit, even for first-time buyers.