Hong Kong property

Sun Hung Kai Properties calls for relaxed mortgage lending for mass market flats

Hong Kong’s financial secretary has indicated on Monday that the government was considering relaxing its mortgage tightening policy

PUBLISHED : Wednesday, 10 January, 2018, 9:33pm
UPDATED : Thursday, 11 January, 2018, 12:00pm

Sun Hung Kai Properties, Hong Kong’s largest developer by market value, has called on the Hong Kong Mortgage Corporation to ease its lending scheme for mass market flats, two days after the city’s financial secretary indicated that a relaxation was being considered by the government.

Executive director Adam Kwok Kai-fai criticised the existing mortgage insurance scheme, which provided a maximum loan-to-value ratio of 90 per cent for homes costing HK$4 million (US$511,330) or less, as “outdated”.

“New flats costing HK$4 million each is close to extinction in Hong Kong. Flats with an area of 300 to 400 square feet have exceeded this budget," he said on Wednesday.

Instead, Kwok, the son of jailed and former co-chairman Thomas Kwok Ping-kwong, said the HKMC should raise the price cap to HK$6 million.

With Hong Kong home prices having risen 13 per cent to an average of HK$12,147 per sq ft last month, according to Midland Realty data, it means that buyers who want to apply for a 90 per cent loan-to-value mortgage could only do so for flats of no more than 329 sq ft.

New flats costing HK$4 million each is close to extinction in Hong Kong. Flats with an area of 300 to 400 square feet have exceeded this budget
Adam Kwok Kai-fai, Sun Hung Kai Properties

To drum up sales, Hong Kong developers have been providing first mortgage loans of 80 to 90 per cent of a flat’s value.

“No businessman is willing to lend HK$80 [to buyers] to sell HK$100 goods,” he said. “Developers’ mortgage schemes are always generating controversial debates.”

Still, Sun Hung Kai is one of a number of Hong Kong developers that have been offering aggressive financing schemes to boost sales.

Last June, it offered mortgages of as much as 120 per cent of the flat value for its Park Yoho Venezia development in Yuen Long. The offer only applied to buyers who already owned a flat with a value of no less than 70 per cent of the would-be purchase price of the Park Yoho Venezia unit.

Sun Hung Kai Properties offering loans worth 120pc of flat value to boost sales of Yuen Long project

Kwok’s remarks came after financial secretary Paul Chan Mo-po told Hong Kong lawmakers at a Legislative Council finance panel meeting on Monday that the government was waiting for the right time to relax the home lending curbs, as it did not want the move to be misinterpreted as a withdrawal of controls to rein in soaring prices.

In a written reply to the South China Morning Post, the HKMC said it “would consider the need to review the Mortgage Insurance Programme in light of changing market conditions, and will do so if it is deemed necessary”.

Last year, the average price for new flats rose 16.9 per cent to HK$12.57 million each from 2016, according to Ricacorp Properties. The price for used flats grew slower at about 13 per cent in 2017.

Hong Kong home prices rise for a 20th straight month as flats keep setting new records

With the exception of Kingswood Villas in the New Territories’ Tin Shiu Wai, homes in 10 major housing estates tracked by the property agent changed hands at above HK$10,000 per sq ft.

Kingswood Villa units are now selling at an average price of HK$9,250 per sq ft, followed by Discovery Bay’s HK$10,319 per sq ft.

The number of transactions for flats that cost between HK$2 million to HK$3 million plunged 34 per cent to 3,245 deals last year from 2016, the property agent’s data showed.

Transaction value for homes worth between HK$3 million to HK$5 million also saw year-on-year decline of 4 per cent in 2017.

“The drop in units involving in smaller lump sum amount reflected the hefty increase in home prices,” said Derek Chan, Ricacorp’s head of research.