Hong Kong imposed new measures on Friday in its fourth bid since October 2009 to control runaway property prices, doubling the supply of land available to build homes and tightening mortgage restrictions.
Property prices in Hong Kong have risen 72 percent since the start of 2009, according to real estate agency Centaline. They have risen 12.5 percent so far this year, surpassing the 1997 peaks.
"We've been cautious on the market for a long time," said David Ng, an analyst at RBS in Hong Kong who sees prices falling 10 percent this year.
"Increased land supply, tighter mortgage restrictions and possible political change will all weigh on the market and makes us negative on the Hong Kong residential property market."
The territory's government will supply enough land to build 6,000 residential units in July-September, double the supply in the current quarter, Hong Kong's Secretary for Development Carrie Lam said.
Real estate buyers looking to purchase flats valued at HK$10-12 million will also have their loan-to-value (LTV) ratios lowered to 50 percent.
LTV ratio for flats valued at HK$7-10 million will be lowered to 60 percent. For those valued below HK$7 million, the ratio will be lowered to 70 percent, Chief Executive of the HKMA Norman Chan said.
Previously, only flats valued above HK$12 million were subject to the 50 percent restriction. Flats valued at HK$8-12 million were subject to an LTV ratio of 60 percent, while those below HK$8 million had a cap of 70 percent.
The LTV is the percentage of a property's value that is mortgaged.
Hong Kong last tightened mortgage restrictions in November last year, when it also slapped a stamp duty of 15 percent on housing transactions conducted within six months of the owner buying the property.
"Although the property market cooled down a bit in March and April this year, there are now signs of renewed exuberance following high transaction prices recorded in recent government land sale auctions," Chan said.
The maximum LTV ratio will also be lowered by at least 10 percentage points regardless of property type and value if the principal income of the mortgage applicant is not made in Hong Kong, Chan added.
Hong Kong legislators have been calling on the government to limit purchases of local properties by buyers from China, whom many blame for pushing up property prices.
The moves come after Hong Kong sold two sites to billionaire Li Ka-shing's Cheung Kong (Holdings) Ltd , with one aimed at luxury development selling below forecasts and the other, intended for the mass market, going above expectations.
Property shares fell on Friday, with bellwether property stocks Sun Hung Kai down 2 percent and Cheung Kong down 1.5 percent. The benchmark Hang Seng Index was down 0.8 percent.
The move to tighten mortgage lending also comes as Hong Kong dollar lending grew faster than deposits, raising concerns among regulators that a fall in property prices may affect lenders' health.
Current loan-to-deposit ratios in Hong Kong stood at 81.7 percent at the end of March, up 10 percentage points from about the same time last year, the HKMA said.
"We are of the view that the up cycle is continuing, and thereby creating increasing risk on the banking system," HKMA's Chan said.
With liquidity tightening, banks such as HSBC and Standard Chartered have begun raising their mortgage lending rates to about 1.5 to 2 percentage points above the Hong Kong Interbank Offered Rate (HIBOR).
This is higher than the 1 percent many lenders were charging at the beginning of this year.
The HKMA is unable to set its own interest rates because the local currency is pegged to the U.S. dollar, which it has pledged to keep even as the greenback falls against most currencies in the Asia.
Property prices in Hong Kong have risen 72 percent since the start of 2009, according to real estate agency Centaline. They have risen 12.5 percent so far this year, surpassing the 1997 peaks.
"We've been cautious on the market for a long time," said David Ng, an analyst at RBS in Hong Kong who sees prices falling 10 percent this year.
"Increased land supply, tighter mortgage restrictions and possible political change will all weigh on the market and makes us negative on the Hong Kong residential property market."
The territory's government will supply enough land to build 6,000 residential units in July-September, double the supply in the current quarter, Hong Kong's Secretary for Development Carrie Lam said.
Real estate buyers looking to purchase flats valued at HK$10-12 million will also have their loan-to-value (LTV) ratios lowered to 50 percent.
LTV ratio for flats valued at HK$7-10 million will be lowered to 60 percent. For those valued below HK$7 million, the ratio will be lowered to 70 percent, Chief Executive of the HKMA Norman Chan said.
Previously, only flats valued above HK$12 million were subject to the 50 percent restriction. Flats valued at HK$8-12 million were subject to an LTV ratio of 60 percent, while those below HK$8 million had a cap of 70 percent.
The LTV is the percentage of a property's value that is mortgaged.
"Although the property market cooled down a bit in March and April this year, there are now signs of renewed exuberance following high transaction prices recorded in recent government land sale auctions," Chan said.
The maximum LTV ratio will also be lowered by at least 10 percentage points regardless of property type and value if the principal income of the mortgage applicant is not made in Hong Kong, Chan added.
Hong Kong legislators have been calling on the government to limit purchases of local properties by buyers from China, whom many blame for pushing up property prices.
The moves come after Hong Kong sold two sites to billionaire Li Ka-shing's Cheung Kong (Holdings) Ltd , with one aimed at luxury development selling below forecasts and the other, intended for the mass market, going above expectations.
Property shares fell on Friday, with bellwether property stocks Sun Hung Kai down 2 percent and Cheung Kong down 1.5 percent. The benchmark Hang Seng Index was down 0.8 percent.
The move to tighten mortgage lending also comes as Hong Kong dollar lending grew faster than deposits, raising concerns among regulators that a fall in property prices may affect lenders' health.
Current loan-to-deposit ratios in Hong Kong stood at 81.7 percent at the end of March, up 10 percentage points from about the same time last year, the HKMA said.
"We are of the view that the up cycle is continuing, and thereby creating increasing risk on the banking system," HKMA's Chan said.
With liquidity tightening, banks such as HSBC and Standard Chartered have begun raising their mortgage lending rates to about 1.5 to 2 percentage points above the Hong Kong Interbank Offered Rate (HIBOR).
This is higher than the 1 percent many lenders were charging at the beginning of this year.
The HKMA is unable to set its own interest rates because the local currency is pegged to the U.S. dollar, which it has pledged to keep even as the greenback falls against most currencies in the Asia.
