Date
22 November 2017
Home prices of small flats have been skyrocketing through last year. Photo: HKEJ
Home prices of small flats have been skyrocketing through last year. Photo: HKEJ

Will tighter mortgage rules cool down small flats market?

Financial Secretary John Tsang will deliver his 2015-16 budget speech this Wednesday. Most people, from ordinary housewives to the biggest property developers, are eager to know if the government will unveil any measures to curb rising home prices.

Home prices, especially those of small flats, have been skyrocketing through last year, and the government will have to do something to reduce the heat in the market.

However, such measures are unlikely to be announced during the budget speech, according to the Hong Kong Economic Journal.

The newspaper quoted sources close to the government saying there is a gap between the time the budget is drafted and when it is published and announced. As such, it may not be the best platform to launch new property rules, which have to take into consideration sudden changes in market sentiment.

Kwan Cheuk-chiu, an independent economist, told the newspaper that it would be more appropriate for the Hong Kong Monetary Authority (HKMA), which is in a rather neutral position, to announce such changes.

Experts expect the city’s de facto central bank to unveil new measures on property mortgages sometime after the budget speech.

For example, the interest rate “stress test” for small flats may be raised to 4 or even 5 percent from 3 percent at present. Or the proportion of mortgage loan for a small flat may be tightened to 60 percent from 70 percent.

Changes to the mortgage policy are likely to be controversial, according to Kwan.

Some tend to believe the market is in a panic-buying mode, and government intervention won’t alter the situation.

Others see a bubble in the small-flat market, and any adverse policy change would burst it, Kwan said.

The Lunar New Year holiday is traditionally an off-peak season in the housing market as buyers and investors wait for the budget speech to come out. As such, transaction volume in the new-home market is expected to hit a 20-month low in February.

Only 250 transactions were recorded for the month as of the last weekend, according to Sing Tao Daily.

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CG

EJ Insight writer

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