The Hong Kong government is expected to tighten mortgage rules as the government imposes intensified measures to suppress the so-called “rare” increase in housing prices.
Norman Chan, chief executive of the Hong Kong Monetary Authority (HKMA), said that down payment for apartments that cost more than HK$12 million ($1.54 million) will increase from 30 percent to 40 percent, effective immediately.
The government has been looking to introduce measures to control housing prices that have soared 40 percent since January last year, fuelled by mainland Chinese buyers and low mortgage rates. Financial Secretary John Tsang said that housing prices are approaching the 1997 level, the peak of the previous property bubble that was followed by a six-year slump in the housing market.
“This is a serious attempt by the government to slow the growth in property prices,” Nicole Wong, regional head of property research at CLSA Asia Pacific Markets in Hong Kong, told Bloomberg. “Maybe a lot of people still have HK$4.8 million for a down payment on a HK$12 million flat, but luxury is a leading sector and this is sending a message that this is serious.”
Mr. Chan added that banks in Hong Kong will be asked to apply a stress test on mortgage rates increasing 2 percentage points, while debt-to-income ratio of mortgage borrowers should not be 60 percent or lower when mortgage rates increase by 200 basis points.
According to HKMA, new mortgage approvals in the city-state dropped 6.2 percent to HK$35.4 billion in June from May.