Buyers are being tempted by 120 percent mortgages
Another day, another dollar. Image credit: Krystal T (Flickr)
Non-banking lenders are getting a tad too generous.
This was the view of the Hong Kong Monetary Authority regarding the phenomenon of high mortgage loan-to-value ratios being bandied by property developers recently to ride out falling home prices.
In a statement, Arthur Yuen, deputy chief executive of the Hong Kong Monetary Authority, warned that developers providing such mortgages will indirectly increase banks’ credit risks.
“We have been in communication with banks to study whether we will need appropriate measures to strengthen risk management over banks financing developers that provide high mortgage lending,” Yuen said.
The Hong Kong central bank currently caps mortgages for properties valued at less than HKD10 million (USD1.3 million) at 60 percent — a restriction that does not apply to developers and nonbanking institutions.
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Under the government’s Mortgage Insurance Programme, however, first-time buyers can take out mortgages of as much as 90 percent for homes valued less than HKD4 million (USD515,000).
Recent mortgage rates seem to overstep those limits. Last month, Cheung Kong Property started offering loans as high as 123 percent of home values in its Yuccie Square project in Yuen Long.
Similarly, Sun Hung Kai Properties offered to lend as much as 120 percent of the value of units in its Park Yoho Venezia project, also in Yuen Long. Buyers, however, must have already bought a unit priced at 70 percent of the purchase value of a new unit.
“Property developers are very aggressive and trying to offload inventory because the outlook of the Hong Kong property market is not looking good,” Australia & New Zealand Banking Group Ltd economist Raymond Yeung told Bloomberg.
Since prices reached peak levels in September, Hong Kong’s residential market has suffered a property correction of 13 percent.
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Source : property-report.com
Read more…Are HK developers being too generous with mortgages?
