HK offers mortgage loans of up to HK$10 million for homebuyers

February 26, 2020 16:05
The fixed-rate mortgage loan scheme aims to provide homebuyers with more loan options and reduce the risks of interest rate volatility. Photo: CNSA

Financial Secretary Paul Chan Mo-po on Wednesday unveiled a fixed-rate mortgage loan scheme to support the property sector and enable more citizens to acquire homes.

“The residential property market has been largely quiet since last June with transactions and prices generally retreating. Yet, the current flat prices are still out of line with economic fundamentals and people's affordability,” Chan said in his annual budget.

“The government will continue its endeavour to increase land and housing supply.”

With an aim to provide potential homebuyers with more loan options and reduce the risks of interest rate volatility, the government-backed Hong Kong Mortgage Corporation will launch a pilot scheme to offer through banks fixed-rate mortgage loans, with interest rates of 2.75, 2.85 and 2.95 percent per annum for those payable within 10, 15 and 20 years respectively.

The loan amount is capped at a ceiling of HK$10 million per loan transaction, Chan said.

The total loan amount under the scheme is HK$1 billion, subject to review based on market response.

The financial chief also unveiled a package of measures to increase the supply of public and private housing in the city.

The Planning Department will start technical studies on the first batch of shortlisted brownfield clusters suitable for public housing development as soon as possible. It is estimated to provide over 20,000 public housing units.

The government is currently rezoning 12 other sites to provide some 11,000 housing units, over 90 percent of which will be for public housing.

It will also start rezoning procedures for another 25 sites in the coming year to provide nearly 85,000 units.

The government has also started receiving applications for the Land Sharing Pilot Scheme in the first half of 2020. The land area to be approved will be capped at 150 hectares.

Chan said the first land parcel under the Tung Chung East reclamation work is ready for handover next month, and is expected to provide 10,000 public housing units in the first quarter of 2024.

The government will start in the second half of the year the first phase of the Hung Shui Kiu/Ha Tsuen new development area, upon the approval of funding by the Legislative Council.

As regards private housing supply, Chan said the government’s land sale program for 2020-21 comprises 15 residential sites, which are capable of providing about 7,500 residential units.

Together with railway property development projects and private development and redevelopment projects, the potential land supply for the whole year is expected to provide land for about 15,700 housing units.

There are calls for the government to relax the implementation of the buyer's stamp duty and doubled ad valorem stamp duty (DSD), commonly known as "two harsh measures", to assist people in buying homes.

But in view of a lukewarm property market, government sources told the Hong Kong Economic Journal that the government does not see the need to withdraw or relax the "two harsh measures".

Chan also said the government will pursue the controversial HK$500 billion Lantau Tomorrow Vision reclamation project, under which artificial islands will be created for housing off Lantau Island.

“I am aware that some members of the public are concerned that the construction of Lantau Tomorrow may impose a heavy burden on public finances,” Chan said.

“In this regard, the government has all along been implementing a stringent audit and monitoring mechanism for the approval of funding for public works and the use of public funds. We are confident in and capable of ensuring that the government can afford the expenditure on future works.”

The Development Bureau is seeking funding from Legco to start engineering, planning and financial assessments, he said.

Chief Executive Carrie Lam Cheng Yuet-ngor had announced in her policy address in October last year that the mortgage cap would be raised for first-time homebuyers, with the value of property eligible for 90 percent loan-to-value ratio doubled to HK$8 million.

For an 80 percent ratio, the cap on value would be raised to HK$10 million from HK$6 million.

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EJ Insight writer