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The new measures, announced last Friday, come just three days after the regulator announced earlier measures to tighten mortgage lending in a bid to cool Hong Kong’s overheating housing market.
The most recent set of rules stipulates that the maximum loan-to-value ratio (LVR) for owner-occupied residential properties valued below HK$7 million (AU$1.3 million) will be lowered by a maximum of 10 percentage points.
For example, the maximum LVR applicable to properties with a value of HK$6 million (AU$990,000) or below and subject to the LVR cap of 70 per cent will be lowered to 60 per cent.
In addition, the maximum debt-servicing ratio (DSR) for borrowers who buy a second residential property for self-use will be lowered to 40 per cent from 50 per cent, and the stressed-DSR cap will be lowered to 50 per cent from 60 per cent.
Finally, the maximum DSR for mortgage loans for all non-self-use properties, including residential properties, commercial and industrial properties and car park spaces, will be lowered to 40 per cent from 50 per cent, and the stressed-DSR cap will be lowered to 50 per cent from 60 per cent.
The above three counter-cyclical measures take effect immediately.
The HKMA said the relevant measures are an ongoing risk management arrangement.
“The property market in Hong Kong became buoyant again in the second half of 2014, with notable increases in prices and transaction volume, particularly the small- and medium-sized residential units,” HKMA chief executive Norman Chan said.
“Moreover, the household debt-to-GDP ratio also continued to increase to a historic high level of over 64 per cent.
“In view of this, the HKMA considers it necessary to introduce new counter-cyclical measures to safeguard the stability of the banking and financial system.
“The HKMA appreciates that the new measures will inevitably affect some of the users and first-time home buyers. Hence, the HKMA has always strived to achieve a balance between the need to tighten counter-cyclical measures to protect banking stability and the desire to minimise negative impact on genuine end-users, especially the first-time home buyers, when introducing these measures,” Mr Chan said.
However, Mr Chan stated that it is the duty of the HKMA to introduce further measures to safeguard the stability of the banking and financial system given the renewed signs of overheating in the property market, particularly the small-sized residential units.
“The HKMA reminds prospective buyers to take into account the relevant risks, particularly the impact of a potential property market or economic downturn or interest rates rise on their repayment ability, and [to] avoid overstretching themselves,” he said.