More lenient lending rules spark hope for Hong Kong’s real estate market

Hong Kong leader introduces more relaxed mortgage rules to address the country’s unaffordable housing issue

Wong Tai Sin Temple, Hong Kong. Travelman/Shutterstock

In her recent annual policy speech, Hong Kong leader Carrie Lam announced more lenient lending rules to give buyers access to bigger loans, hoping to drive sales of small-to-medium apartments and alleviate the housing shortage in the city, reported Reuters.

The Mortgage Insurance Programme essentially reduces the required down payments for home purchases.

For properties worth up to HKD8 million (USD1 million), borrowers can get a loan-to-value ratio (LTV) of as much as 90 percent. Meanwhile, for properties priced as much as HKD10 million (formerly capped HKD6 million), borrowers can carry an LTV of 80 percent.

Before this new policy, the government only allowed such a high ratio for units that were valued for half as much.

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This means that prospective property buyers will not be required to deposit a huge amount of cash upfront. For instance, the down payment on a home worth HKD8 million will drop from HKD3.2 million to HKD800,000.

“Last evening, our agents sold three apartments in Fanling (in the New Territories), which was a lot because there haven’t been three transactions for a whole month,” said Louis Chan, Centaline Property Agency Asia Pacific residential chief executive.

He said that the properties were worth around HKD4 million to HKD6 million and the investors were quick to make a decision shortly after the Hong Kong leader’s announcement. The sellers also reduced the price by two to three percent.

“The new mortgage policy will help the secondary market for flats below HKD10 million. In the last eight years, the demand for this segment has been suppressed by the restrictive policies and the transaction volumes have been very low,” Chan added.

As for the rest of the year, he predicts a five percent drop in home prices.