Hong Kong introduces new down payment rules
June 14, 2011 - Hong Kong
Hong Kong's Monetary Authority has taken further steps to cool the booming property market for the fourth time since October 2009.
Last Friday, the government introduced new loan-to-value (LTV) ratios on properties valued above HK$7 million and also revealed plans to double the land supply in Q3, enough to build 6,000 flats.
According to Reuters, real estate agency Centaline found that property prices in Hong Kong have risen 72 per cent since 2009 and 12.5 per cent so far this year, surpassing 1997 levels.
The new LTV ratios for flats valued below HK$7 million (US$900,000) will be lowered to 70 per cent.
For those valued at HK$7-10 million (US$899,228-1.28 million), the new ratio will be lowered to 60 per cent and buyers looking to buy property valued at HK$10 or above (US$1.28 million) will have their LTV ratio lowered to 50 per cent.
Previously, only flats valued above HK$12 million (US$1.54 million) were subject to the 50 per cent restriction.
Flats valued at HK$8-12 million (US$1 million) were subject to an LTV ratio of 60 per cent while those below HK$8 million (US$1 million) had a cap of 70 per cent.
According to Financial Times, foreign buyers must add an additional 10 percent to the down payments, in a move largely directed at wealthy mainland Chinese buyers who are believed to be responsible for about 30 per cent of the purchases of luxury property.
"Current property prices have exceeded their peak levels in 1997," Norman Chan, head of HKMA said Friday. "As the boom cycle in the property market continues to evolve, the risks associated with bank's mortgage lending business increase correspondingly.
There is a continuing need for banks to increase their risk management for their mortgage lending business," said Mr. Chan.
David Ng, an analyst at RBS in Hong Kong sees government initiatives lowering prices by 10 per cent this year.
"Increased land supply, tighter mortgage restrictions and possible political change will all weigh on the market and makes us negative on the Hong Kong property market," he said.
The seven-member Hang Seng Property Index dropped 1.2 per cent as of 10:15 am in Hong Kong trading to the lowest since September 1 2010, compared with the 0.8 decline in the benchmark Hang Seng Index (HSI).
Proeprty transactions fell for a fifth month in May, yet home prices gained 1.3 per cent in the week ended June 5 from the previous seven days, according to Centaline.
Via Property Report
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