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Last week, the Hong Kong Monetary Authority (HKMA) announced that it is increasing the maximum loan-to-value (LTV) ratio for self-use homebuyers who are purchasing properties valued up to HK$30 million ($3.83 million). This marks the first easing of restrictions on home transactions since they were introduced in 2009.
According to Eddie Yue, the Chief Executive of HKMA, these changes are intended to assist residents in purchasing or upgrading their homes. This adjustment is in response to a 13% decline in prices from their peak in 2021
Self-use homebuyers now have the opportunity to secure loans of up to 70% of the value of residential properties valued at HK$15 million or less, and up to 60% for properties valued between HK$15 million and HK$30 million. These new ratios represent an increase from the previous 50% limit.
The loan-to-value (LTV) ratio signifies the proportion of a property’s value that can be borrowed through a mortgage. By relaxing the cap on these ratios, prospective homebuyers will no longer require as much upfront capital, making it more accessible for them to enter the housing market.
According to Eddie Yue, he stated that despite these changes, the banking sector in Hong Kong is well-prepared to handle any potential difficulties resulting from a significant drop in property prices. Hence, he believes there is sufficient flexibility to ease these measures.
The Hong Kong Monetary Authority (HKMA) further mentioned that for properties valued above HK$30 million and all residential properties not intended for self-use, the maximum loan-to-value (LTV) ratio will remain at 50% without any changes. In addition, there will be an adjustment in the maximum LTV ratio for non-residential properties, increasing it from 50% to 60.
Market participants have been advocating for the government to ease restrictions in the property market, including the elimination of additional stamp duties for second-time homebuyers and non-citizens. This request comes after home prices in one of the world’s most expensive markets declined by 15% last year.
Despite experiencing four months of price increases at the beginning of the year, Hong Kong’s private home prices recorded a monthly decrease of 0.7% in May. Many potential homebuyers opted to stay on the side lines due to uncertainties surrounding potential interest rate hikes and the overall economic outlook.
While the market correction has taken place, top officials in the city have reiterated on multiple occasions that there are no plans to remove the tightening measures implemented to regulate the market.
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