Why HK should not follow Macau's new mortgage relief policy

February 05, 2020 11:37
Macau has announced a mortgage relief measure to help citizens amid the financial impact of the China coronavirus outbreak, but the move is not something that Hong Kong can afford to copy, the author argues. Photo: Reuters

In the wake of the Wuhan coronavirus outbreak, the policy responses of Macau government have been swifter and far more decisive than that of the Hong Kong administration.

To alleviate the financial impact caused by the epidemic, Macau has come up with another measure. The Macau Association of Banks announced on Monday that it will allow local loan customers, including individual customers and corporate customers, to file an application for the suspension of principal repayment of their mortgages for six months.

Macau admittedly serves as a role model for Hong Kong when it come to effective measures to prevent the spread of the virus, but the gambling enclave's latest move to relieve mortgage repayment burden is not something we should copy.

First of all, Hong Kong simply does not have the financial resources to support such measure. Our mortgage market is simply much bigger.

As of November 2019, Macau had outstanding mortgage loans of 230.7 billion patacas (HK$223.8 billion), less than half of its fiscal reserve of 550 billion patacas.

By contrast, Hong Kong’s outstanding mortgage loans amounted to HK$1.43 trillion, exceeding the government reserve of HK$1.1 trillion.

Also, Hong Kong is an international financial hub, and banks here have great exposure to international businesses in addition to the local market.

If banks have to bear the costs of such policy relief, that could undermine their financials and lead to a chain of undesirable consequences.

It would also be against Hong Kong’s principle of minimum intervention with the free market.

This article appeared in the Hong Kong Economic Journal on Feb 4

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal columnist