Hong Kong introduced more measures aimed at cooling the property market and protecting financial stability after home prices rose to a record last year.
Buyers of properties valued at up to HK$7 million (US$902,672) will have to make larger down payments, while mortgage rules for second-home purchases will be tightened, Hong Kong Monetary Authority (HKMA) Chief Executive Norman Chan (陳德霖) said at a briefing yesterday. The measures take effect immediately.
Rounds of cooling measures from 2012 have failed to tame the market, fueling complaints that the rising prices are worsening Asia’s largest wealth gap. While Chan acknowledged that the steps will hurt first-time home buyers, he cited a duty to protect the stability of the banking system.
“From a risk-management perspective, the policy is correct,” Australia & New Zealand Banking Group Ltd Hong Kong-based analyst Raymond Yeung (楊宇霆) said.“However, young couples will find it more difficult to fulfill their basic housing needs.”
A government index of residential home prices surged 13 percent to a record last year driven by gains among smaller properties. Prices have more than doubled since 2009, spurred by record-low mortgage rates and money flowing in from mainland China. Mortgage loans approved last month surged by 21.4 percent from the previous month to HK$30.3 billion, the HKMA said in a separate statement.
Property prices in Hong Kong might drop 3 percent in the short term after the new measures, Centaline Property Agency Ltd (中原地產) managing director Louis Chan (陳永傑) wrote in an e-mailed statement. He expects transaction volumes to “shrink drastically” in the next three months.
“People will take profit because the run-up in Hong Kong property developers’ stock prices has been quite good,” BNP Paribas SA Hong Kong-based analyst Lee Wee Liat said by telephone. The government is not enacting any “significant kind of measure, but incremental measures, trying to contain the pace of the price increase or the demand increase.”
The maximum amount that can be borrowed for homes meant for personal use and valued at less than HK$7 million will be reduced to 60 percent of the purchase price from 70 percent, HKMA’s Chan said.
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