Hong Kong’s eased mortgage rules for unfinished homes will have little impact on property market, as buyers fret over interest rates and economy, analysts say

First-time homebuyers will not rush to purchase unfinished flats in Hong Kong despite relaxed mortgage rules, as they remain reluctant to make significant investments when interest rates are high and the economy is weak, analysts have said.

Sammy Po Siu, chief executive of Midland Realty’s residential division for Hong Kong, on Saturday questioned the effectiveness of the measures, aimed at stimulating the property market.

“The relaxation measures have not significantly impacted buyers’ purchasing desires,” he said, pointing to worries over interest rates, stock market weakness and limited economic growth.

Hong Kong finance chief considers allowing first-time homebuyers to borrow more

Under the changes that came into effect on Friday, eligible first-time homebuyers need only make a 10 per cent down payment for properties under construction and valued up to HK$10 million (US$1.3 million), according to a subsidiary of the government-backed Hong Kong Mortgage Corporation. The remaining payment can be covered by a loan.

Previously, buyers acquiring unfinished flats valued above HK$6 million were not eligible for such mortgages.

The adjustment, aimed at aligning the policy with rules for completed residential properties, is intended to boost buyer sentiment in the first-hand property market, where developers have been under pressure to cut prices to accelerate sales. CK Asset Holdings, a leading developer owned by tycoon Li Ka-shing, last month priced its Coast Line II apartments project in Yau Tong at a seven-year low.

For unfinished homes valued between HK$10 million and HK$15 million, owners can borrow up to 80 per cent of the amount, while for flats worth between HK$15 million and HK$30 million they are entitled to 70 per cent mortgage financing.

Under the easing of rules, properties under construction must be covered by the Lands Department Consent Scheme and scheduled for completion within 12 months from the date the funds are borrowed for the mortgages. For those not meeting the criteria, HKMC Insurance, a subsidiary of the Hong Kong Mortgage Corporation, will make considerations on a case-by-case basis.

“In making the amendments this time, the HKMCI has considered the property market conditions and its own business and risk factors, and is seeking to enable the Mortgage Insurance Programme to further promote home ownership,” the insurer said.

But analysts poured cold water on the relaxation measures, saying the moves would do little to boost the property market as homebuyers were still adopting a wait-and-see approach.

The easing of mortgage rules has so far had a limited effect on the market. Interest in the new residential project the Mori in Tuen Mun, for example, has been muted. Only 33 flats out of 158 on offer had been sold as of 1pm on Saturday, according to property agents. Developed by Hong Kong-listed Road King Infrastructure, Mori has 693 flats in total and is scheduled for completion in June next year.

‘Raise age limit for Hong Kong public housing tenants free from declaring assets’

“While the relaxation measures offer certain benefits, such as increased financing options, current market conditions, including high interest rates, volatile stock markets and a slowing economy, have contributed to people’s hesitancy to enter the property market,” Po said.

He called on authorities to consider reducing stamp duty on property transactions to encourage buying, arguing that easing mortgage policies alone was not enough.

“Home seekers remain reluctant to borrow due to uncertainty surrounding interest rate trends. Reducing heavy stamp duties on property transactions could potentially encourage more home purchases.”

The government first began loosening mortgage rules two months ago, which it had not done since 2009. The changes were aimed at making flats more affordable for first-time homebuyers and easing conditions for existing owners to trade up their property.

Under those measures, completed homes worth up to HK$15 million for owners’ personal use can get up to 70 per cent mortgage financing, while those valued between HK$15 million and HK$30 million are entitled to 60 per cent loans. Overseas investors also became eligible for up to 50 to 70 per cent mortgage loan financing to match conditions for local buyers.

Kennedy Town plot fetches just 6 bids as market gloom deters developers

High interest rates have helped to deter buyers in one of the world’s most expensive property markets, leading to a 17 per cent drop in home prices from a recent peak in 2021.

Leo Cheung Sing-din, adjunct associate professor at the University of Hong Kong’s department of real estate and construction, said the new measures would only give the property market a minor boost.

“The new measures will offer more flexibility and another option for buyers to choose their payment methods, which is a good thing and can stimulate the market,” he said.

“The impact will be insignificant,” he said. “There has been no signs of a rebound yet,” he said. “Homebuyers are all holding a wait-and-see attitude as property prices are expected to further go down.”

Subsidised flats built by Hong Kong developers to sell at 65 per cent of market price

Cheung noted that developers still had a sizeable number of unsold homes.

Economist Andy Kwan Cheuk-chiu, director of the ACE Centre for Business and Economic Research, agreed that the relaxed mortgage rules in July had not improved the market. He said drastic measures were needed to prop up the market and restore homebuyers’ confidence, estimating prices would drop by about 4 per cent in the fourth quarter.

“The relaxed measures won’t have much impact as people still have a bleak outlook of the property market, and property prices are still under correction,” he said. “The market will still be stagnant without drastic measures to boost the economy and restore homebuyers’ confidence.”