Property buyers in Hong Kong could soon find it easier to get a mortgage if new proposed measures come to fruition.
In a bid to “balance financial stability and the interests of first-time buyers”, the Hong Kong government, in conjunction with the Hong Kong Monetary Authority, is looking at relaxing loan-to-value ratios in its mortgage market for certain home purchases,.
Hong Kong’s housing market has been struggling with property prices falling and transaction numbers faltering, with the sector being impacted by high interest rates. Improving people’s ability to get a mortgage by relaxing the rules could bring more buyers into the fold and spur on the market.
The measures have been proposed by the financial secretary, Paul Chan Ma-po, although he recently reiterated that the government would not lift its property cooling strategy, which was put in place to try and combat sky-rocketing house prices in the city.
Earlier in the month, Chan said at a Legislative Council financial affairs panel: “If we can, we will further ease the loan-to-value ratio for people who do not have their own homes but want to purchase one for self-use. I will consider this.”
Mortgage market moves in Hong Kong
The most recent figures show that Hong Kong’s mortgage market is now worth almost HK$1.81trn (about £183bn), according to Statista figures, and mortgages account for around 17% of all borrowing in the city.
Meanwhile, partly due to government strategies to curb the market, house prices in Hong Kong are expected to continue to decline, potentially until 2025. The latest index shows a 0.7% fall in prices in May. While this is expected to make property more affordable, there is still a need to keep the sluggish market afloat.
This is why there could be further changes to mortgage ratios to help more people to buy, with the government already making financing easier to access for buyers in its 2022-2023 budget. At this point, the cap on 80% LTV mortgages on properties was increased to HK$12m (£1.2m), up from HK$10m.
Further to this, qualifying first-time buyers purchasing a home could borrow up to HK$10m on a mortgage with a 90% LTV, up from HK$8m previously.
The idea at the moment, it seems, is for the government to prioritise residential property for people to live in, as opposed to invest in, as Chan pointed out.
“Residential property in the market is for living in, not for speculating, but there is nothing wrong with using residential property for investment,” Chan said.
“However, when property supply is still very limited, I would hope those who don’t have a flat but who want one for self-use can be prioritised.”
Hong Kong investors looking to the UK
Steady numbers of investors based in Hong Kong who do wish to buy up residential property are continuing to turn to the UK property market, where prices have performed consistently strongly over the long-term. Mortgage restrictions in Hong Kong could also be a factor driving this trend.
Earlier this year, research published by London estate agent Benham and Reeves found that Hong Kong buyers are the most prominent owners of UK property from abroad, with many agents noting an increase in investment since the BNO visa was introduced.
Of all foreign-owned UK property, 13.2% is currently owned by Hong Kong investors, equating to around 24,759 properties across England and Wales. There has also been an 11.6% rise in the presence of Hong Kong buyers since May 2022.
Marc von Grundherr, director of Benham and Reeves, said: “It’s no secret that England & Wales is a hugely attractive market for overseas property buyers, with London being a particularly desirable location.
“While this popularity isn’t limited to one single nation, it’s certainly being driven by Hong Kong buyers who continue to be the most prominent foreign nations operating within our bricks and mortar market.”
