HK may scrap mortgage insurance scheme

HK Monetary Authority seeks to prevent a real estate bubble

The Hong Kong Monetary Authority may scrap a programme that offers mortgage insurance for investment properties as the city’s central bank tries to prevent a real estate bubble.

Home-loan insurance for investment properties accounts for about one per cent of Hong Kong’s overall mortgage insurance programme, said HKMA spokeswoman Alice Lo in an interview yesterday. Mortgage insurance allows home buyers to borrow beyond 70 per cent of the property’s purchase price.

The insurance programme covering investment properties may be scrapped ‘to tackle the speculative trend of the surging market,’ Ms Lo said.

Home prices in Hong Kong have rallied this year on record low interest rates and an influx of money from China. Sales of luxury homes worth more than HK$10 million (S$$1.8 million) almost tripled in September, according to the Land Registry. Hong Kong’s leader, Chief Executive Donald Tsang, signalled on Oct. 14 that his government may release more land to deflate a property bubble.

‘We’re not in a bubble yet’ in the mass housing market, said Peter Churchouse, chairman of property investment firm Portwood Capital. ‘High-end luxury is where the concern really is. That represents no more than 5 perc ent to 10 per cent of the market.

Prices of luxury homes may rise further because of a lack of supply as an economic recovery spurs demand, Savills Plc said on Tuesday.

Hong Kong may consider increasing down payments for luxury homes in the city priced at more than HK$20 million to 40 per cent as property prices rally, Ming Pao reported, without saying where it obtained the information.

Down payments for such homes are 30 per cent now, the Chinese-language Hong Kong newspaper said yesterday. HKMA’s Ms Lo said Chief Executive Norman Chan met with representatives from five banks on Tuesday to hear views about the financial markets, including the property and mortgage lending markets.

People invited to the meeting with Mr Chan, who started as HKMA chief this month, included Peter Wong, who heads HSBC Holdings Plc’s Hong Kong unit, and Hang Seng Bank Ltd. Chief Executive Officer Margaret Leung, according to today’s Standard newspaper.

Since most home buyers pay in cash, tightening lending requirements or raising mortgage rates would be of little help in cooling down the luxury market, the English-language newspaper said, citing an unidentified banking source.

Foreign buyers, especially, tend to prefer duplexes and penthouses over standard apartments in Hong Kong, Peter Yuen, Savills’s senior director in Hong Kong, told reporters at a briefing on Tuesday.

Henderson Land Development Co, controlled by billionaire Lee Shau-kee, said last week that it sold a duplex apartment for HK$439 million, or HK$88,000 a square foot.

The six-member Hang Seng Property Index has jumped 77 per cent this year, outpacing the 56 per cent gain for the benchmark Hang Seng Index. The government is the city’s biggest provider of land and has altered supply to support or depress prices.

Source: Business Times, 22 Oct 2009