Hong Kong to relax housing rules
The Hang Seng Properties Index rose as much as 3.9% after chief executive John Lee announced the relaxed mortgage rules
HONG Kong will loosen mortgage rules to support the flagging real estate sector and boost spending as China’s slowdown weighs on the city’s economy.
Chief executive John Lee said he will raise the amount of loans homebuyers are allowed to borrow for some properties and broaden a residency-by-investment programme.
“We must maintain our development momentum and self-renewal, and... we must embrace changes while staying principled, innovative and flexible in meeting challenges and opportunities,” Lee said in his annual policy address on Wednesday (Oct 16).
The Hang Seng Properties Index rose as much as 3.9 per cent after Lee announced the relaxed mortgage rules, outperforming the main Hang Seng Index. Shares of New World Development surged as much as 6.5 per cent before paring gains.
Lee set his sights on boosting the economy after cementing Beijing’s authority over the former British colony with a national security law earlier this year, a move Western governments criticised for muzzling open discussion in the Asian finance hub.
The city’s economy has grown in the first six months within the official forecast range of 2.5 to 3.5 per cent, thanks to strong exports that offset sluggish consumption, although China’s slowdown and geopolitical uncertainties have cast a cloud on Hong Kong’s growth outlook.
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A focus of Lee’s speech was the ailing property sector, with home prices hovering near a 2016 low.
The maximum loan-to-value ratio for all homes will be set at 70 per cent, he said, allowing some homebuyers to fork out lower down payment. The ratio is presently capped below that threshold for homes above HK$30 million (S$5.05 million) and 60 per cent for those valued above HK$35 million.
A broadened investment migration programme will include homes valued at HK$50 million or above as part of the required HK$30 million investment. Previously excluded, such property purchases would fulfil a third of that requirement.
Thomas Chak, head of capital markets and investment services at Colliers International, said the new home investment policy will help attract wealthy individuals to the city and boost transaction volume in luxury properties, but have limited impact on the general residential market.
The recent stimulus bonanza by Beijing, alongside the US Federal Reserve’s interest rate cuts, may provide some relief. Borrowing costs in the city rise and fall with the Fed’s decisions as the local currency is pegged to the US dollar.
Lee’s housing measures add to his administration efforts over the past year to boost the real estate market, including by removing most home purchase curbs and cutting property buying taxes. Prices picked up slightly earlier this year before continuing a decline. BLOOMBERG
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