Hong Kong Eases Mortgage Rules to Bolster Property Market

In an effort to bolster the struggling property market in Hong Kong, the government is implementing changes to mortgage rules for homes under construction. The relaxation of regulations aims to address the high borrowing costs that have weighed on the market.

According to a statement from the Hong Kong Mortgage Corporation’s subsidiary, eligible first-time home buyers can now make a down payment of just 10% for properties under construction valued up to HK$10 million (US$1.3 million). This adjustment is a significant shift from the previous requirements.

The relaxation of mortgage rules is expected to boost sentiment in the first-hand property market, where developers have been facing pressure to reduce prices in order to stimulate sales. Notably, CK Asset Holdings Ltd., a prominent developer owned by Li Ka-shing, recently priced its new project at a seven-year low.

While this change provides more purchasing power to new home buyers, industry experts highlight that it may not have a significant impact on the overall property market unless further measures are taken. Sammy Po, CEO of the home division at Midland Realty, suggests that relaxing mortgages on unfinished properties alone does not address the underlying issue. He emphasised the need for the government to also revise the stress test requirement, which ensures that buyers can afford future rate rises when taking on mortgages.

Without additional measures, Po predicts a 2% to 3% drop in home values for the full year. It’s worth noting that the government had recently loosened mortgage rules for the first time since 2009, allowing buyers to make lower down payments. However, the high interest rates in one of the world’s most expensive property markets have deterred buyers, leading to a 17% decline in home prices from their peak in 2021.

The impact of the latest mortgage rule changes and the potential need for further measures will shape the trajectory of Hong Kong’s property market in the coming months.