Remarks by CE/MA at Media Standup
Speeches
28 Feb 2024
Remarks by CE/MA at Media Standup
Eddie Yue, Chief Executive, Hong Kong Monetary Authority
- Today I would like to announce that, after careful consideration, the Hong Kong Monetary Authority (HKMA) has decided to adjust the countercyclical macroprudential measures for property mortgage loans and other related supervisory requirements.
- The HKMA’s countercyclical macroprudential measures aim to ensure that banks manage the risks over their property mortgage lending business effectively, and have sufficient capacity to cope with challenges from a sharp correction in property prices. Since the measures were implemented in 2009, the HKMA has been closely monitoring market conditions—including property prices and transaction volumes, and the local and external economic environment—to evaluate the need for appropriate adjustments to the measures.
- Property prices continue to adjust recently. Residential property prices fell by 7% in 2023, and further declined by 1.6% in January 2024, with a cumulative correction of more than 20% from their peak in 2021. The situation in the non-residential property market is similar. The average prices of offices fell by approximately 7% in 2023, while market data showed that the vacancy rate of Grade A offices rose to about 16% at the end of last year.
- The HKMA considers that there is room to relax the countercyclical macroprudential measures for property mortgage loans, and to suitably adjust other related supervisory requirements, while continuing to maintain banking stability and ensuring the proper risk management of property lending by banks. These adjustments include:
| (i) |
Raising the maximum loan-to-value ratio for self-occupied residential properties. After the adjustment, the maximum loan-to-value (LTV) ratio for self-occupied residential properties with a value of HK$30 million or below will be increased to 70%. For self-occupied residential properties valued at HK$35 million or above, the maximum LTV ratio will be increased to 60%. To avoid a sudden drop in applicable LTV ratios, ratios for properties valued between HK$30 million and HK$35 million will be adjusted downward gradually. The maximum LTV ratio for non-self-use residential properties will be increased from 50% to 60%. |
| (ii) |
Increasing the maximum LTV ratio for non-residential properties from 60% to 70%. |
| (iii) |
Increasing the maximum LTV ratio for property mortgage loans assessed based on the net worth of borrowers from 50% to 60%. This adjustment is applicable to both residential and non-residential properties. |
| (iv) |
Given the US rate hike cycle might be approaching an end, the probability of a further rise in mortgage interest rates in Hong Kong in the near future is relatively low. The interest rate stress testing requirement for property mortgage lending will hence be suspended. |
| (v) |
Taking into account the current property market situation, the financing caps for property development projects will be raised back to the pre-2017 levels. The overall financing cap will be increased from 50% of the expected value of the completed properties to 60%, within which the financing cap for the value of the property site will be increased from 40% to 50%, and the financing cap for the construction cost will be increased from 80% to 100%. |
- These adjustments will take effect from today and apply to property transactions with provisional sale and purchase agreements signed today or subsequently.
- I would like to stress that, even with these adjustments announced today, the Hong Kong banking sector has ample buffers to cope with any challenges from a sharp correction in property prices. Making appropriate adjustments to the countercyclical measures can lessen their impact on the public in buying or selling properties. However, prospective buyers must carefully assess their ability to afford to purchase a property and the financial risks involved.
- The HKMA will continue to monitor market developments closely and introduce measures to safeguard banking stability as market conditions evolve.
