Lam Cheng: Property prices are estimated to continue to fall, so it is no need to enter the market immediately.
(By Ngan Lun-lok)
Yesterday, the Policy Address announced to relax the upper limit of the property price under the mortgage insurance plan, which is the first time to relax the mortgage after the continuation of the strict mortgage plan since 2009, and it becomes a hot topic immediately. The upper limit of the property price for a mortgage in 90% for the first-time buyer is doubled from HKD4 million to HKD8 million; The upper limit of the property price for a mortgage in 80% is increased from HKD6 million to HKD10 million, and it will be suitable for people who change houses. It is widely expected that the large increase in the amount for starter homes this time will stimulate the property price to rise, and the prices of small and medium-sized housing will be the first to rise. Government sources stressed that the measures are not "rescue measures.” Chief Governor Carrie Lam Cheng Yuet-ngor also points out that everyone expects property prices to go down and there is no need to enter the market immediately.
Yesterday, the Government announced to relax the upper limit of the property price under the mortgage insurance plan immediately, increasing the property prices upper limit for the mortgage in 90% of the most from HKD4 million to HKD8 million, which is suitable for the first-time buyers; And increasing the property prices upper limit for the mortgage in 80% of the most from HKD6 million to HKD10 million, which is suitable for the first-time buyers and people who change houses for self-use. The upper limit of the Debt Service Ratio (DSR) is unified to 50%. However, it is limited to completed residential properties, but not applicable for pre-sale properties.
The new plan does not apply to submortgage cash-out.
It is worth noting that, it needs to pay an additional 15% of insurance cost if customers want to apply for mortgage loan at property price above the upper limit (which is HKD6 million under 80% mortgage insurance and HKD4 million under 90% mortgage insurance) before the amendment, and the premiums can be shared with monthly mortgage payments. Under the new plan, the buyer still needs to do the stress test. While if the pressure test fails, there is still a chance to apply for a mortgage if the DSR is no more than 50%. The new plan does not apply to submortgage cash-out.
The news of mortgage relaxation makes many developers close the sales and raise prices (see another press release). Carrie Lam Cheng Yuet-ngor was also asked at the press conference yesterday whether she would worry about property prices would be stimulated. She responded that the relaxation of the mortgage is to support the first-time self-use buyers, and homebuyers do not need to enter the market immediately, since everyone expects property prices to fall, in particular, after this social dispute. The Senior Vice President of mReferral Mortgage Brokerage Services, Cho Tak-ming points out that, the increase in property prices in recent years is in multiples, leading the housing units below HKD4 million are almost disappeared, so it is believed the government is making adjustment in response to market demand. However, increasing the DSR upper limit to 50% this time is expected to make the measures to be only enjoyed by capable first-time buyers.
The burden of payment requirements has increased significantly.
He gives an example, the current down payment for a property unit at HKD8 million is only HKD0.8 million, which is HKD2.4 million or 75% less than before. However, the monthly installment payment is increased from HKD19,279 to HKD28,919, an increase of 50%, and the monthly income requirement needs to reach HKD57,838. Similarly, the down payment for a property unit at HKD10 million is decreased largely from HKD5 million to HKD2 million, a downrange of 60%. However, the monthly installment payment is increased by 60% at the same time, and the monthly income requirement needs to reach HKD64,264. However, it is worth noting that, under the new measures, the DSR for the property unit at HKD4 million will be increased from 45% to 50%, which will reduce the monthly income requirement.
The Managing Director of Centaline Mortgage, Wong Mei-fung expresses, the new measures will help to solve the problem of insufficient down payment, and market purchasing power in recent years is inclined to buy the first-hand new property with high-percentage mortgage, so the new measure can also restore the market to normal and avoid long-term polarization between the first-hand and second-hand properties market. It is also believed that the new measure will not significantly increase the credit risk, as banks do not have to bear the additional credit risk involved in the high-percentage mortgage.
The Proxy Managing Director of Ricacorp Mortgage, Woo Wing-yan expresses, the relaxation range this time is much larger than expected, and it is expected to have the greatest effect on the second-hand property, also will enliven the market of changing house. However, tiny house welcomed in the past by the first time buyers who have less down payment becomes the secondary elections, and its selling price will be under pressure.
