〈Asian Post, May 20, 2017〉Hong Kong’s de facto central bank further tightened its grip on mortgage loans to property buyers as it sought to mitigate risks in the city’s real estate market, which shows signs of overheating.
Loan-to-value ratios will be cut 10 percentage points for borrowers with one or more pre-existing mortgages and purchasers whose income mainly comes from outside Hong Kong, the Hong Kong Monetary Authority (HKMA) said on its website on Friday. Debt-servicing limits for the two purchase groups will also be cut 10 percentage points, the HKMA added.
The new tightening came as Hong Kong’s housing market maintained its breakneck pace, shrugging off policymakers’ months-long efforts to tame surging prices.
Earlier this month the HKMA tightened limits on bank loans to property developers after attempts to rein in the market in November last year by more than doubling the property stamp duty for non-first-time buyers to 15 percent proved to be in vain.
Rating and Valuation Department statistics showed property prices in the world’s least affordable city in March surpassed their recent peak, recorded in September two years ago.
Transaction volume for residential properties more than doubled from about 3,300 in January this year to about 7,000 last month.
“The risk of overheating in the property market in Hong Kong continues to increase,” HKMA Chief Executive Norman Chan Tak-lam said. “The keen competition for mortgage business in the banking sector has heightened the risk of overheating in the property market, and weakened the resilience of banks to cope with a downturn in the market.”
Yet analysts questioned the effectiveness of the new measures. “Basically, the new curbs may affect investors most rather than homebuyers. Given a 10 percent drop in the mortgage rate only acts as a modest deterrent to the deep pocketed investors, over the coming few weeks we will see a wait-and-see attitude from them. But it will not take long for investors to make a comeback after figuring out the limited effect of the new measures,” said Sammy Po Siu-ming, residential chief executive of Midland Realty.
Vincent Chan, Hong Kongbased managing director of real estate agency Qfang.com, agreed with Po, believing the new regulation is an unnecessary move.
“To be sure, I don’t think Hong Kong banks, with along track record of prudence in lending to homebuyers, would face the risk management problem in mortgage loans,” said Chan.
〈Asian Post, May 20, 2017〉Homebuyers in the city will find it tougher to secure mortgages after the Hong Kong Monetary Authority tightened lending rules for the second time in a week in an attempt to cool the sizzling property market.
The new measures are aimed at borrowers with multiple loans and those who derive the majority of their income from outside Hong Kong as the de facto central bank seeks to reduce lenders' credit risks.
Starting immediately, banks will need to allocate a larger risk weighting for the assessment of credit worthiness. They will also have to reduce the amount of allowable loans on residential and commercial properties, according to a statement released by the HKMA yesterday.
The tightening measures follow close on the heels of a record rise in property prices and transactions in March, eclipsing the previous peak set in September 2015 by 4.5 per cent, the HKMA said, citing data from the Rating & Valuation Department. The HKMA has now unveiled eight rounds of tightening measures since 2014.
"The long-term sustainability of the interest margins on mortgage lending has been under growing pressure," HKMA chief executive Norman Chan Tak-lam said. That meant "less capital can be generated from this line of business, further weakening the ability" of banks "to cope with a possible market downturn," he said.
Until now officials had focused on using prudent measures such as caps on loans, and adjustment of the debt-servicing ratios and stamp duties. Residential mortgage loans totaled HK$1.119 trillion at the end of last year, equivalent to 5 per cent of the banking system's assets, a level that is considered low by international standards, according to global ratings agency Fitch Ratings.
Housing affordability is one of the gravest issues facing Hong Kong's incoming chief executive, Carrie Lam Cheng Yuet-ngor, who has pledged to take strong measures to address the issue. The government in November 2015 imposed a 15 per cent stamp duty on second-time borrowers, while the HKMA last week ordered banks to reduce loans to developers.
The amount of loans allowed for residential property valued at less than HK$10 million will be cut to 50 per cent of their value for borrowers with outstanding mortgages from 60 per cent, while lending for homes exceeding HK$10 million will be cut to 40 per cent from 50 per cent with immediate effect.
〈The Standard, May 19, 2017〉A report from the China Index Academy has revealed the country's listed real estate enterprises are set to face big challenges in both sales and financing this year, due to tightened real estate measures.A report from the China Index Academy has revealed the country's listed real estate enterprises are set to face big challenges in both sales and financing this year, due to tightened real estate measures.
More companies have turned to traditional financing channels, which include bank loans, medium-term notes and trusts instead of corporate bonds, according to a report released by the China Real Estate Top 10 Research group, a research team under the academy.
According to the report, an increasing number of real estate companies look for overseas financing channels to prevent the squeezed capital flow. It also revealed overseas financing has grown 308 percent year-on-year in the first quarter of 2017, which was 169.3 percent than the previous quarter.
The following year will further have a higher capital risk for some small and middle sized listed real estate companies, as the result from the difficulty in selling houses in some hotspot cities or third and fourth-tier cities which these companies mainly focused on, the report stated.
Ouyang Jie, senior vice president of Hong Kong-listed real estate enterprise Future Holdings, said sales will keep a single-digit increase in the second half of 2017 due to a possible slight growth in housing price, even though the growing pace of real estate increment slowed down.
He added the government also had begun to regulate the real estate market in the first and second-tier cities of China, which will lead to a slump in real estate sales and a drop in the average price in eight of those cities.
'Third and fourth-tier cities, where housing price grow too fast, will also be regulated', he said. Ouyang added real estate companies should also increase the capital reserve by promoting financing and reducing participation in buy-back, division or purchasing shares, and adjust the investment structures.
According to the report, the average gross asset of the top 10 Shanghai and Shenzhen-listed Chinese real estate companies reached 323.3 billion yuan ($46.9 billion) by the end of 2016. The result was 6.34 times higher than the amount achieved for 2015. The average net profit also grew 7.32 times to 9.58 billion yuan year-on-year.
〈China Daily, May 18, 2017〉A consortium led by Hong Kong-listed China Resources Land has purchased a central London commercial building for 315 million pounds ($400 million), according to reports on Thursday from London-based Chinese language publication UK Property and Investment Weekly.A consortium led by Hong Kong-listed China Resources Land has purchased a central London commercial building for 315 million pounds ($400 million), according to reports on Thursday from London-based Chinese language publication UK Property and Investment Weekly.
The property at 20 Gresham Street, located at the heart of London's Square Mile financial district, comprises around 22,000 square meters of office space. It is primarily let to ICBC Standard Bank. Other occupiers include petrochemicals company Koch Supply & Trading and law firms Sacker & Partners and TLT Solicitors.
The asset was being sold by AXA Investment Managers, which started looking for buyers in February. The China Resources Land consortium also contains a 20 percent stake from the New York-based investment company NorthStar Realty.
20 Gresham Street was designed by London-based company Kohn Pedersen Fox Associates, construction was completed in 2008. Rent currently produces annual income of around 12.8 million pounds, which represents a net initial yield of around 4 percent for the investors.
The purchase represents China Resources Land's first United Kingdom deal. It rides on a continued wave of Chinese investment into London's commercial properties, which accelerated with the pound's depreciation following the referendum decision in June to leave the European Union. At its weakest in October, the pound was down by around 20 percent against the renminbi.
〈China Daily, May 18, 2017〉The special administrative region government on Wednesday announced that it had commissioned the Hong Kong Housing Society (HKHS) to study the feasibility of limited residential housing development on the edges of country parks. The idea is understandable as Hong Kong is running out of useable land for both public and private housing development. However, voices of opposition are just as commonplace as the demand for more affordable housing, given the growing support for nature conservation and bio-diversity here. That is why the government is merely trying to find out if small-scale housing development in selected fringe areas of country parks, which does not significantly affect the eco-system, is indeed possible.
Country parks occupy a whopping 41 percent of Hong Kong’s total land area. And some of them are local residents’ favorite spots to unwind, relax and enjoy nature. In dire contrast to this picture, is the sad reality that the urban districts just a few kilometers away are the most densely populated in the world today, where some poor families live in tiny spaces often filled with all kinds of safety and health hazards. Apparently country parks are protected by law in Hong Kong and no one can touch them without amending the law first. Then again, nobody in their right minds can fault outgoing Chief Executive Leung Chun-ying for making residential housing development a top priority of his final year in office, either.
The “controversial” feasibility study by the HKHS on residential development on the edges of country parks is an example of leaving no stone unturned to find usable land for subsidized housing development. Some people immediately whipped out the word “controversial” when they heard the news, even though the government said specifically it will only look at the periphery of country parks, not inside them. Such overreaction can be deemed unreasonable and even insensitive to those people in need. After all, many people would agree that the need to alleviate the negative impact of housing shortages on Hong Kong society is just as pressing, if not more so, as maintaining those country parks.
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