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Housing policy cushions Hong Kong’s property slump, adding US$3 billion to wealth of city’s six richest real estate tycoons

South China Morning Post

發布於 2019年10月17日16:10 • Lam Ka-sing, Sandy Li and Lilian Cheng kasing.lam@scmp.com
  • Government’s effort to boost home ownership is likely to unleash pent-up demand and lead to an earlier-than-expected home price recovery, says Citibank property analyst Ken Yeung
  • The increase in the mortgage cap opens up a world of options for buyers, says Louis Chan of Centaline Property Agency
Prospective buyers queue up to buy flats at CK Asset’s Seaside Sonata residential project in Sham Shui Po, on Thursday. Photo: Handout.
Prospective buyers queue up to buy flats at CK Asset’s Seaside Sonata residential project in Sham Shui Po, on Thursday. Photo: Handout.

The Hong Kong government's relaxation of mortgage payment rules for the first time in nine years would help spur sales of lived-in homes by as much as 30 per cent in the quarter ending in December, putting a cushion under the slump in the city's real estate sales.

In her televised policy address on Wednesday, the city's Chief Executive Carrie Lam Cheng Yuet-ngor unexpectedly raised the mortgage cap to 90 per cent, from 60 per cent, for home worth as much as HK$8 million (US$1 million), enabling first-time buyers to secure more loans for their purchases.

"Hong Kong government's effort at boosting home ownership by introducing several new initiatives are likely to unleash pent-up demand and drive an earlier-than-expected home price recovery," said Citibank's property analyst Ken Yeung, who estimated that third-quarter sales had declined by 5 per cent.

The unexpected incentive came at a fortuitous time for Sun Hung Kai Properties (SHKP) and CK Asset Holdings, which offered a combined 453 apartments for sale a day after Lam's address, the first time since 2015 for the city's two largest property developers to compete head to head.

CK Asset, the flagship company of Hong Kong's wealthiest man Li Ka-shing, sold 110 flats out of 218 units on offer at the Seaside Sonata project in Sham Shui Po. SHKP, controlled by the Kwok family, sold 93 flats out of 235 units at the Cullinan West III complex, in the same neighbourhood.

Together the sales were the worst since early February, when only two of 101 flats on offer were sold on Friday at Reach Summit, a Yuen Long project developed by Henderson Land Development and New World Development. Still, the policy bolstered Hong Kong's listed property developers, adding an estimated US$3 billion to the combined wealth of the city's six wealthiest property tycoons including Li and the Kwok family, according to Bloomberg.

The increase in mortgage allowance was a much-needed help to Hong Kong's home market, whose bull run had stumbled in the past few months as a combination of the 15-month-long US-China trade war and the city's worst political crisis in history sapped appetite for big-ticket purchases.

"(Before today's sales) 143 new flats have been sold this month. This is very poor in terms of half-month figures in the last five to six years. Major headwinds " the US-China trade war, protest rallies on weekends that lead to the early closure of the MTR network made flat viewings difficult," said Louis Chan, Asia-Pacific vice-chairman at Centaline Property Agency. "We estimate secondary market turnover in the fourth quarter will surge by 30 per cent from the previous quarter."

Under the new measure, the government-backed Hong Kong Mortgage Corporation (HKMC) will relax the ceiling on first-home mortgages, enabling buyers to borrow up to 90 per cent of a completed property's value to a maximum of HK$8 million. The lending cap for borrowers eligible for 80 per cent loan financing was raised to HK$10 million.

Justin Chiu, executive director of CK Asset, at the sales launch of Seaside Sonata residential project in Sham Shui Po, on Thursday. Photo: Handout
Justin Chiu, executive director of CK Asset, at the sales launch of Seaside Sonata residential project in Sham Shui Po, on Thursday. Photo: Handout

The increase in the mortgage allowance opens up a world of options for buyers, increasing the eligible choices by 30 times, since Centaline has about 300 home listings that each cost less than HK$4 million, while those priced at HK$10 million jump to 9,000, Chan said.

The increased allowance was the "collective decision" between the government and the Hong Kong Monetary Authority (HKMA), which oversees the HKMC, Chief Secretary for Administration Matthew Cheung Kin-chung said on radio.

Experts from the de facto central bank "carefully analysed" the policy's implications and deemed it was "suitable" to roll out, he said.

HKMA also chaired a meeting a day earlier with the mortgage corporation and nine of the city's largest banks, who pledged their support to the monetary authority's plan to help small businesses survive through the economic slump.

Hong Kong's desperate homeowners slash prices by 20 per cent after unprecedented violence on National Day

The average price of used homes across Hong Kong fell 1.8 per cent between May and August, according to figures released by the Rating and Valuation Department, while the more current Centa-City Leading Index sank 2.4 per cent from September 1 to October 6.

Cheung dismissed claims that the government was driving up property prices. The new policy aims to help first-time buyers as properties bought under the new rules would be self-occupied instead of being used for investments or speculative activities, he said, as the government "had no intention of urging people to purchase flats" with the plan.

"Many people from the middle class have faced difficulties in paying the first lump sum, including many who have worked for many years but still did not have enough money. Now at least they'll have a choice," said Cheung.

"We expect the higher ceiling for property values eligible for high mortgage ratios is likely to increase the liquidity in the secondary market and encourage owners to upgrade and trade their flats," said Rosanna Tang, head of research for Hong Kong and Southern China at Colliers International.

Buyers queue up to buy Sun Hung Kai Properties' flats at the Cullinan West III in Nam Cheong, on September 26, 2019. Photo: Xiaomei Chen
Buyers queue up to buy Sun Hung Kai Properties' flats at the Cullinan West III in Nam Cheong, on September 26, 2019. Photo: Xiaomei Chen

"For those first time buyers who have the ability to repay, we are helping them by giving a choice on relaxing the down payment," said Frank Chan, Secretary for Transport and Housing.

The scheme would also help developers to clear their unsold empty flats before the vacancy tax to take place as early as January, 2020.

"Sun Hung Kai Properties will benefit most as it is the largest holder of empty flats," said Raymond Cheng, head of Hong Kong and China Research at CGS-CIMB Securities.

It is believed SHKP still has more than 1,000 empty units on hand.

Completed homes left unsold for more than six months after receiving an occupation permit are liable to pay to a levy of 5 per cent of the property value.

Separately, the Secretary for Development Michael Wong Wai-lun said the compensation rate for taking private land under the Lands Resumption Ordinance will not be raised, despite calls from landlords for an increase.

The rate, HK$1,389.6 per square foot for agricultural land located near planned new towns or major infrastructure projects, "is very much enough" and public money had to be well spent.

"Bear in mind, under the current scheme " it's resuming land for public housing, not commercial use. Lands are all for public housing related use," he said at a press conference on Thursday.

Copyright (c) 2019. South China Morning Post Publishers Ltd. All rights reserved.

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