Hong Kong’s relaxed mortgage regulations attract more home seekers, but fail to drive significant property transactions.

Hong Kong’s Move to Boost Homebuying Interest

By Clare Jim

HONG KONG (Reuters) – Hong Kong’s property market is seeing a glimmer of hope as the government raises the maximum mortgages available to homebuyers. This marks the first relaxation in curbs on home purchases since 2009. While the move has boosted shopping interest over the weekend, property agents report that it has done little to increase transaction volumes.

One of the world’s most expensive property markets, Hong Kong has raised its cap on the loan-to-value (LTV) ratio to 60% to 70% from 50% for properties worth up to HK$30 million ($3.8 million).

This move is aimed at helping those looking to buy or upgrade homes for their own use. As a result, visitors to new home launches and existing homes have increased by 20% to 30% during the past weekend compared to the previous week, according to Louis Chan, Asia Pacific vice chairman of Centaline Property Agency.

However, Chan also noted that buyers are not reacting quickly due to the uncertain economic conditions and the prospect of interest rate hikes. He mentioned that 75% of existing transactions are for properties worth HK$10 million or less, which are small-sized apartments. Therefore, the new measure will only benefit about a fifth of the transactions.

After experiencing a 15% drop in home prices last year, market participants have been urging the government to relax property curbs. However, Financial Secretary Paul Chan has reiterated that there are no plans to further relax measures after Friday’s move.

Despite the easing of restrictions, the stock market’s reaction has been muted, with most property developers seeing minimal gains. Sun Hung Kai Properties and New World Development, however, experienced slight declines.

Alvin Cheung, associate director of Prudential Brokerage Ltd., explained that setting a limit on higher transaction volumes is an existing stress test on borrowers’ repayment ability, which has not been relaxed. He also emphasized that to truly improve the property market, a basket of relaxations is needed, as people are usually reluctant to borrow more during times of rising interest rates.

While the government move has faced some controversy, many developers have welcomed it. Henderson Land stated that it facilitated property trading for homebuyers, while Asia Standard International mentioned that it eased some of the burden of down payments. Phileas Kwan, executive director of Asia Standard, reported that their new development had been 9.4 times oversubscribed over the weekend, with buyers including newly-weds and home upgraders.

Despite the mixed reactions, it seems that Hong Kong’s property market is cautiously navigating through these changes.

(Reporting by Clare Jim; Editing by Clarence Fernandez)

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