The Hong Kong Monetary Authority lowered caps for bank loans to property developers, trying to contain risks in the city’s booming real-estate mar
The Hong Kong Monetary Authority lowered caps for bank loans to property developers, trying to contain risks in the city’s booming real-estate market.
From June 1, the caps for construction finance will be cut to 40 percent of site value and 80 percent of construction cost, with the overall limit reduced to 50 percent of the expected value of completed properties. For property developers with weaker finances, banks should consider further lowering the financing ratios, the monetary authority said.
Local institutions should set aside an adequate amount of capital for exposures to property developers offering high loan-to-value mortgages, it said. Lending by some property developers had been “inconsistent” with prudent practices, the HKMA said.
Last month, Hong Kong’s de facto central bank expressed concern about the riskiness of mortgages with high loan-to-value ratios issued by developers, as some analysts warned that property prices in the city are unsustainable.
Hong Kong’s property market, the world’s least affordable, has been on a tear despite attempts by the city’s leaders to cool prices in November by imposing additional taxes. That prompted warnings from analysts including Cusson Leung at JPMorgan Chase & Co., who said that any external shocks could trigger tighter liquidity in the city’s banking system and increase home buyers’ borrowing costs.
bloomberg.com
