HK retail property transactions rise after mortgage rules eased

Hong Kong

TRANSACTION volumes for retail shop spaces rose in Hong Kong after monetary authorities eased rules on commercial property mortgages last week in an effort to support a market that has been hard hit by the coronavirus pandemic.

The Hong Kong Monetary Authority (HKMA) raised the cap on the loan-to-value ratio for commercial property mortgages to 50 per cent from 40 per cent, giving retailers easier access to loans and boosting liquidity in the struggling commercial property sector.

Retail property prices in Hong Kong have fallen by 30 to 50 per cent since June last year as anti-government protests and the coronavirus pandemic hit demand and the wider Hong Kong economy.

Since the measures kicked in last Thursday, there has been an average of six to seven deals completed a day, compared to two to three on average earlier this year, according to Dennis Cheng, senior sales director at Ricacorp Properties.

"Buyers would not raise the offer price in the last few months, but now they would raise it by a few per cent to complete the deal," Mr Cheng said.

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Some investors expect the commercial property market to recover from here, as the coronavirus stabilises, and as investors bet on more measures from the HKMA such as a possible cut to the stamp duty paid on commercial properties purchases.

"HKMA's move sent an indicative signal to the market that if the market continues to be bad, there could be second or third easing," said Reeves Yan, the head of capital markets at real estate services firm CBRE Hong Kong.

The extra loan will benefit buyers of retail shops more than office space investors, who tend to be more financially sound, agents said.

Mr Cheng said one of his clients had already benefited from the measure, having been able to borrow an extra 10 per cent on the back of his HK$600 million (S$106 million) worth of assets, which has provided some relief to his businesses. REUTERS