HK Policy Address 2024: Loan-to-value ratio for home mortgages to be relaxed amid home price slump
Hong Kong Free Press
Hong Kong’s government will relax the mortgage loan-to-value ratio amid a property slowdown, a move welcomed by the real estate sector.
The city’s leader John Lee announced on Wednesday, during the 2024 Policy Address, that the ratio for residential properties would be set at a maximum 70 per cent regardless of value, whether the property is for self-use or rent, and whether or not purchasers are first-time buyers.
The maximum debt servicing ratio would be adjusted to 50 per cent, Lee said, adding that non-residential properties would enjoy the same mortgage rules.
The new policy will come into immediate effect, with the Hong Kong Monetary Authority issuing guidelines to all banks.
Residential property prices have declined markedly in recent years and dropped continuously since mid-July, a few months after the government axed extra stamp duties to boost the market.
Prior to the new mortgage policy, non-first-time buyers, buyers of residential properties for rent or purchasers of properties priced above HK$35 million faced a maximum loan-to-value ratio of 60 per cent and a maximum debt servicing ratio of 40 per cent.
Louis Loong, a property sector lawmaker, welcomed the new policy.
“Along with all the relaxation introduced in February, rules regulating the property market have returned to the conditions in 2009, a time when the government imposed few property cooling measures, ” Loong said in Cantonese at a press conference.
“The new policy sent a positive message to the sector. We’ve always argued that a weak property market is not good for the overall economic outlook. “
Regina Ip, a pro-establishment lawmaker and government adviser, said Wednesday’s address included various measures to boost the property market.
Ip said she believed that with these new measures and other initiatives to strengthen Hong Kong’s role as a hub economy, the property market would soon enjoy a full recovery.
Luxury home investment allowed
Lee also announced on Wednesday the expansion of an investment immigration scheme to allow applicants to invest in luxury flats.
“It’s a policy to attract investors to enter Hong Kong and settle well here, ” Loong said.
The New Capital Investment Entrant Scheme, a once-suspended scheme revived late last year, will be expanded to allow investment in residential property worth no less than HK$50 million, effective immediately.
The investment immigration scheme started in 2003 but was blamed by some for encouraging property speculation. It was suspended in 2015.
In his address last year, Lee announced he was reviving it, allowing foreign nationals – and residents of Taiwan, Macau and mainland China “that have obtained permanent resident status in a foreign country” – to be granted a two-year visa if they invest at least HK$30 million in permissible assets in the city.
Those who successfully extend the visa and live continuously in the city for seven years can become permanent Hong Kong residents.
On Wednesday, Lee said that – while investment in residential properties would be allowed as part of the total capital investment – it would be capped at HK$10 million.
Starting from March 1 next year, the scheme will be expanded to count investments made through an eligible private company wholly owned by an applicant, Lee added.
As of September 13, the Immigration Department had granted 35 visas under the New Capital Investment Entrant Scheme.
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