Hong Kong, where real estate prices have fallen two-thirds since their 1997 peak, may allow apartment buyers to take out bigger mortgages to boost the sagging market.
The city may raise the limit on mortgages on resale apartments from the current 70 percent as part of measures to be announced in October, the < While the plan may make it easier for people to buy homes, it won't be successful unless consumer confidence also improves, some investors said. Hong Kong's unemployment rate has surged to a record and more than 10 percent of the city's homes are now worth less than their mortgages. The government failed in its last attempt to revive the market. In November, it halted land sales and stopped selling subsidized housing. Property sales, nevertheless, slumped 32 percent in the first half from a year ago and prices fell one-tenth. "The effectiveness of the plan hinges on the confidence of buyers," said Joseph Lau, chief investment officer at Tai Fook Asset Management Ltd. "They are simulative measures but whether people will react is another question." The city's government has been seeking ways to restore confidence in the real estate market. Last Thursday, it announced it won't allow Hong Kong's two rail companies to build more homes along their lines to reduce an oversupply of apartments that some investors say may take three years to clear at current sales rates. The city has about 79,000 apartments completed or under construction that need to be sold, Suen said at luncheon. MTR Corp and Kowloon-Canton Railway Corp, the city's two rail operators, won't start planned projects for as many as 66,000 apartments over the next few years, he said. Some investors say the property market won't be able to turn around until the region's economy improves. The government in May halved this year's economic growth forecast to 1.5 percent and said the jobless rate may rise further from 8.6 percent in June after the SARS epidemic caused consumer spending and tourism to plunge during the second quarter. By the end of June, 153,017 homes had values lower than their mortgages, according to Centaline Property Agency Ltd, one of the city's two biggest realtors. Personal bankruptcies also marked record highs. There have been 62,127 bankruptcy petitions since January 1999, compared with 4,034 from 1994 to 1998.
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