The Central Bank of Hong Kong moved on Friday to limit mortgages amid the rising concern over a real estate bubble in the country. This initiative is intended to slow the surge in luxury property prices, which is driven by wealthy home buyers coming from mainland China.
Cautioned of a possible property bubble, Donald Tsang, Hong Kong’s chief executive, said the government could launch more land for sale.
Mortgage limit for luxury property will be capped at 60 percent, down from 70 percent, and mortgage loan values will also be restricted, said Hong Kong Monetary Authority (HKMA) on Friday.
“It is very difficult to detect if a bubble is there,” said Hong Kong Monetary Authority Chief Executive Norman Chan. “But what we’re concerned about is, given the very sharp rise in prices in this top segment of the property market, the risk, or credit risk, to these mortgage loans to these properties has increased.”
The 60-percent mortgage limit will be applied to property worth more than HK$20 million, said the HKMA. The 70 percent ratio will be maintained for properties valued below that, but the maximum loan amount will be limited at HK$12 million.
Prices increased 26 percent in 2009, and even higher in the luxury segment, where Chinese homebuyers are seizing apartments. According to some analysts, most of these homebuyers are entrepreneurs who are not deterred by the mortgage limit and have lots of cash.
Mister Chan has also cautioned banks and homebuyers to account for an ultimate increase in interest rates from a record low.