In order to boost the city’s struggling real estate industry, which has been burdened by excessive borrowing costs, Hong Kong is lowering its mortgage regulations for newly constructed residences.
A subsidiary of the Hong Kong Mortgage Corporation announced on Friday that qualified first-time homebuyers can now put down 10% on residences that are under construction and have a value of up to HK$10 million ($1.3 million).
Prior to this, purchasers of similar homes with a value greater than HK$6 million could only get a 70% loan-to-value ratio, necessitating a larger down payment.
The change will contribute to a better mood in the market for used homes, where developers have been under pressure to lower prices to boost sales. Li Ka-shing’s CK Asset Holdings, a reputable developer, priced its new project at a seven-year low last month.
Sammy Po, chief executive of the house division at Midland Realty, said that although the change will provide first-time homebuyers more purchasing power, the broader real estate market will not benefit from it unless the government lifts the stress test requirement.
In order to ensure that they can afford rate increases if they take out mortgages, buyers must undergo a stress test.
According to Mr. Po, “simply relaxing mortgages on unfinished properties is not addressing the problem.” If the government does not implement additional measures, he anticipates a 2% to 3% annual decline in housing values.
Just two months prior, the government lowered the minimum down payment requirements for flat purchases for the first home since 2009 for the first time.
In one of the most expensive real estate markets in the world, high loan rates have discouraged purchasers, causing a 17% decline in home values from their peak in 2021.
- Published By Team Hongkong Journalist
