HKMA eases property loan regulations amid market correction

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28th February 2024 – (Hong Kong) The Hong Kong Monetary Authority (HKMA) has announced a recalibration of its macro-prudential measures concerning property mortgage loans, responding to the continuing adjustment in property prices and the broader economic environment fraught with uncertainties.

In a decisive move reflective of the recent downtrend in the property market, the HKMA has issued new guidelines effective 28th February, which ease restrictions on loan-to-value (LTV) ratios for both residential and non-residential properties. This comes against the backdrop of a 7% drop in official residential property prices in 2023, a further 1.6% dip in January 2024, and a transaction volume decrease of 4.5% per month last year.

For residential properties destined for self-occupation, the HKMA has raised the maximum LTV ratios to 70% for values not exceeding HK$30 million, and to 60% for those above HK$35 million. A gradual decrease applies to properties within these two values to mitigate any abrupt impact. Investment properties see an LTV increase from 50% to 60%.

The authority is also boosting the LTV ratio for non-residential properties, including offices and retail spaces, from 60% to 70%, amidst a 7% value decline and a vacancy rate surge to around 16% for Grade A offices in 2023.

Furthermore, in light of the U.S. Federal Reserve’s hints at a possible cessation of rate hikes, HKMA is suspending the stress test that simulates a 200-basis-point rise in mortgage rates.

In a significant shift from the tightened stance of 2017, the HKMA is raising the financing caps for property development projects to pre-2017 levels. This adjustment sees an overall financing cap increase from 50% to 60% of the expected value of completed properties, with constituent caps for site value and construction costs also elevated.