HONG KONG May 12 Hong Kong on Friday imposed
stricter restrictions on bank lending to developers, warning
there was a need to review credit risks posed by property
companies in one of the world's most expensive real estate
Home prices in Hong Kong have more than quadrupled since
2003, according to a government index, while the median monthly
household income has risen just 61 percent in that time, pushing
home ownership out of reach for many.
The Hong Kong Monetary Authority (HKMA), the city's de facto
central bank, said that to strengthen credit risk management
with respect to lending to developers, banks can only lend them
a maximum 40 percent of a site value instead of 50 percent,
effective June 1.
Also, the cap on construction cost financing would be
lowered to 80 percent from 100 percent, it said, while the
overall lending cap would be reduced to 50 percent of the
expected value of a completed property, down from 60 percent.
Mainland Chinese companies have piled into Hong Kong
property, outbidding some of the territory's most powerful
developers and helping to propel prices ever higher.
The HKMA said it was common for property developers to offer
home buyers mortgage financing with high loan-to-value ratios to
promote sales, a trend that was increasing at a rapid pace.
It said lending practices adopted by some developers were
inconsistent with the prudent lending practices followed by
Denis Ma, head of research at property consultancy JLL's
Hong Kong office, said the measures announced on Friday were
unlikely to have much impact on Hong Kong's large local
developers, who were mostly cash-rich.
The HKMA moves "will affect (mainland Chinese) and smaller
local developers the most, as these guys rely more heavily on
financing for their projects compared with the local
heavyweights," Ma said.
Property experts forecast that home prices in Hong Kong,
among the world's highest, will keep rising. Skyrocketing
property prices have added to discontent in the city, with its
7.3 million residents already under strain from high living
(Reporting by Venus Wu and Twinnie Siu; Editing by Anne Marie
Roantree and Richard Borsuk)