Mortgage restrictions should be eased

HK central graffiti

In the past few years, we have been living in circumstances where housing supply is scarce, interest rates are low, and assets are flowing in from abroad. The resulting consequence is that Hong Kong’s property prices exceed what a typical citizen would be able to shoulder financially.

The government has maintained that housing supply will increase; in the subsequent five years from 2018 to 2022, there will be an average of 20,800 private housing units completed each year, a 50% increase from the previous five years. According to estimations at the end of last year, the next three to four years will see the supply of first-hand private accommodation being maintained at 97,000 units. It is expected that the scarcity of housing supply shall ease gradually. In addition, interest rates in the U.S. are continuing to normalise, while the low interest rates that Hong Kong has been experiencing will likely not persist. 

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The government may have promised the increase of housing supply, but the reality of prices continually breaking new highs and the needs of the market still exist. Currently, only properties costing HK$4 million are eligible to borrow 90% of the selling price; this policy is clearly outdated, as the properties which cost that little are most probably going to be far-flung village houses, walk-ups, or small public housing kept in bad condition. The Chief Vice President of Meridian Referral Mortgage, Sharmaine Lau, pointed out that at the beginning of February, Macau released their new rules regarding mortgages for eligible first-time home buyers who are Macau residents and with that, property prices that sit between HK$3.3 million and HK$8 million can attain a loan of up to 80% with a limit of HK$6.4 million. Lau posits that Hong Kong’s methods are outmoded and suggests the government to come up with solutions to allow first-time home buyers onto the property bandwagon, including raising the limit for mortgage restrictions. Raising the limit of properties costing HK$4 million to HK$8 million for a 90% mortgage eligibility would help balance the market and aid its recovery. 

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