The Hong Kong Special Administrative Region government’s relaxation of the maximum loan-to-value ratio for all homes and the conclusion of residential property investments under the New Capital Investment Entrant Scheme are likely to boost the city’s luxury-housing market, property analysts said.
At a news conference on Thursday, Hong Kong Financial Secretary Paul Chan Mo-po said the mortgage relaxation measures necessary to reinvigorate property sales are based on various factors, including property price trends, market transaction volume, the residential housing supply, the geopolitical environment, and the stability of the banking system.
The Hong Kong Monetary Authority unified the maximum loan-to-value ratio for all homes at 70 percent effective Wednesday, reverting to pre-2009 mortgage levels, while the maximum debt servicing ratio will be adjusted to 50 percent, according to its statement.
Mark Leung, Hong Kong real estate analyst at UBS Investment Bank, expects these measures, including the increased loan-to-value ratio, will have a positive effect on Hong Kong’s luxury-housing market.
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The policy shift allows buyers of properties valued at HK$30 million ($3.86 million) or more to make smaller down payments, as the previous loan-to-value ratio was 60 percent. This change eliminates restrictions related to rental properties, first-time purchases, and properties held by companies.
The city also allows migrants to purchase houses valued at a minimum price of HK$50 million as part of the required investment under the New Capital Investment Entrant Scheme, with a cap of HK$10 million for real estate in the overall portfolio.
Tony Lo, executive director and CEO of Midland IC&I Ltd, said the new policy is expected to benefit the HK$50 million to HK$100 million property segment
He said he believes more wealthy investors will enter the high-end real estate market, noting that the US Federal Reserve has cut interest rates by 50 basis points, and the city’s three note-issuing banks have pledged to follow new mortgage rules.
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“The supply of luxury homes in Hong Kong remains tight,” Lo said. “Currently, the luxury-housing investment market is dominated by mainland Chinese buyers, and the new measures are expected to maintain this trend.”
Fewer than 850 secondhand residential properties priced at HK$50 million or above are listed for sale in Hong Kong, accounting for only 2 percent of the overall market, according to local news outlets. Industry analysts predict that the new policy could drive transactions of luxury homes valued at HK$50 million or more to reach 600 this year, potentially hitting a three-year high.
Thomas Chak, head of capital markets and investment services of Colliers, agreed. “It will attract high-net-worth individuals to the city and enhance transaction volume in the luxury properties, but it will have limited impact on the general residential market,” he said of the rule changes.
Chan, the city’s finance chief, said Hong Kong’s housing market has shown a sigh of recovery in the interest rate cut cycle, with a slight uptick in transaction volumes since late September.
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Chan said that Hong Kong’s “banking system is stable and well-managed mortgage risks provide a solid foundation” for the policy shift.
“Hong Kong is a small, fully open economy, and its economic environment is highly susceptible to external influences,” he added.
Chan said that despite flared-up international geopolitical tensions and trade friction, the global economy has maintained growth since the beginning of this year.
