Hong Kong mortgage rules tightened yet again in bid to cool housing market

Regulator unleashes new round of lending restrictions, just three days after the last one, as housing minister says cooling measures to stay put

PUBLISHED : Tuesday, 03 March, 2015, 1:24am
UPDATED : Friday, 15 June, 2018, 2:19pm

Homebuyers will find it tougher to get a mortgage after the Hong Kong Monetary Authority (HKMA) further tightened the lending rules - just three days after unleashing an earlier round of mortgage-tightening measures in an attempt to cool down the housing market.

The HKMA is now saying that the maximum debt-service ratio (DSR) - the monthly repayment as a percentage of monthly income - should be applied not only to the mortgage loans under application but to the total liabilities of the applicants, which include any additional mortgage finance, from whatever sources, needed to complete the purchase plus any other debts or liabilities.

Mortgage broker mReferral's analyst Sharmaine Lau Yuen-yuen believed the new guidelines were "not targeted" at the company or its partner Cheung Kong, which teamed up to provide up to 90 per cent of the flat's value for buyers at La Lumiere, a new residential project in Hung Hom.

But she said the sentiment in the property market was likely to deteriorate further.

It came as the housing minister told lawmakers yesterday that significant falls had been recorded in the number of flats bought by non-locals and the number of properties sold within two years of purchase, suggesting the city's first property-cooling measures were working.

A review of the buyer's stamp duty - aimed at keeping non-locals out of the market - and the special stamp duty - designed to see off speculators - supported keeping both policies in place, said Secretary for Transport and Housing Professor Anthony Cheung Bing-leung.

"After considering the domestic market and the external economy, especially the situation in recent months, [we think] property prices may get more heated. There's a need to keep [both duties]," Cheung told the Legislative Council's housing panel.

Special stamp duty to deter short-term resales took effect in November 2010. It now stands at 10 to 20 per cent of the sale price, depending on how fast the residence changes hands.

The monthly average of short-term resales dropped from 2,661 before the start of the duty, to 1,195 between December 2010 and October 2012, a bureau document showed. And between November 2012 to December last year, that figure dropped to 127.

The buyer's stamp duty introduced in 2012 requires non-locals and companies owned by locals or foreigners to pay an extra 15 per cent.

Before the duty was introduced, non-locals, both individuals and firms, bought an average of 365 homes a month. The monthly figure fell to 115 between November 2012 and December last year.