Thu, Oct 17, 2019 - Page 11 News List

HK to raise mortgage cap for first-time homebuyers

FIGHTING INEQUALITY?A monthly salary of HK$57,838 could buy an HK$8 million apartment, borrowing 90% on a 30-year mortgage, but the median salary is HK$17,500


Hong Kong Chief Executive Carrie Lam (林鄭月娥) announced plans to help first-time homebuyers break into the world’s least-affordable property market, as she seeks to quell protests fueled in part by the territory’s rising inequality.

The Hong Kong government plans to allow purchasers to borrow up to 90 percent of a property’s value to a maximum of HK$8 million (US$1 million), from HK$4 million previously.

The move would allow first-time homebuyers to buy more expensive homes with a down payment of 10 percent.

Median property prices in the territory last year climbed to 20.9 times the median household income, urban planning consultancy Demographia said.

That compares with 12.6 times for Vancouver and 11.7 times for Sydney, two other centers often cited as among the world’s costliest.

Hong Kong’s income inequality, expressed as a Gini coefficient, was the most for any developed economy in 2016 — a 45-year high. About one in five Hong Kong residents live below the poverty line.

The change to the mortgage-limit ceiling might support home demand and the mass residential market, Bloomberg Intelligence property analyst Patrick Wong (黃智亮) said.

However, not too many buyers would be able to benefit.

Under the new measures, to buy an HK$8 million apartment borrowing 90 percent via a 30-year mortgage would require a monthly salary of HK$57,838, mortgage broker mReferral Corp (HK) Ltd said.

Hong Kong’s median monthly income is just HK$17,500, government data showed.

The cap for those wanting to borrow 80 percent of a home’s value would also be increased from HK$6 million to HK$10 million, Lam said.

The rules only apply to those covered by the Mortgage Insurance Programme, a government-backed plan designed to assist first-time homebuyers.

The Hong Kong Monetary Authority said in a statement that its mortgage rules have not changed.

On the home-supply front, Lam said the government would invoke a colonial-era law for the compulsory purchase of 700 hectares of private land — about twice the size of New York City’s Central Park.

About 400 hectares of that would be used for additional housing in the New Territories, Lam said.

By way of comparison, only 20 hectares of land has been acquired by the Hong Kong government over the past five years.

Much of it would presumably be purchased from Hong Kong’s biggest developers or private landowners.

Henderson Land Development Co (恆基地產), Sun Hung Kai Proprieties Ltd (新鴻基地產), New World Development Co (新世界發展) and CK Asset Holdings Ltd (長江實業) hold about 1,000 hectares of agricultural land in the New Territories.

The Hang Seng Property Index extended gains in yesterday afternoon’s session, rallying as much as 2.2 percent, while New World jumped 5.2 percent and Sun Hung Kai gained 3.1 percent.

“Developers are rallying, but shares aren’t going to the highs they reached when Lam announced the withdrawal of the extradition bill. That shows traders are still conservative,” UOB Kay Hian Holdings Ltd (大華繼顯控股) executive director Steven Leung (梁偉源) said. “The mortgage-rule relaxation may help home buyers a little, but it’s not a big help. It’s the super-high home prices that are hurting buyers.”

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