Hong Kong Newly Drawn Mortgages Fall to Year Low on Property Curbs, Quake

Hong Kong’s newly drawn down mortgage loans fell to the lowest level in a year in February, after the government adopted measures to reduce the risk of a property bubble.

The amount of loans which had previously been approved and were taken up declined 16 percent from January to HK$18.3 billion ($2.3 billion), the least since February 2010, the Hong Kong Monetary Authority said on March 25. The value of newly approved loans in the month rose 8.2 percent to HK$30.3 billion, according to the HKMA.

Hong Kong’s government in November imposed additional taxes on home sales and tightened mortgage requirements, the toughest measures yet to rein in home values. Hong Kong may adopt further measures on mortgages to contain risks in banking credit if needed, HKMA Chief Executive Norman Chan said this month.

“This indicates the impact from the government’s tightening measures in November,” said Cusson Leung, property analyst at Credit Suisse Group AG in Hong Kong. “The uncertainty from Japan’s earthquake has worked as an excuse for buyers to ask for a cut in prices, but I expect there will a rebound in home sales volume in the coming month on strong demand.”

Home prices have surged more than 70 percent since the beginning of 2009 to the highest since 1997, according to an index compiled by Centaline Property Agency Ltd., the city’s biggest privately held real-estate broker, fueled by record-low mortgage rates and an influx of wealthy mainland Chinese buyers.

The U.S. may raise interest rates “sooner than expected,” said Chan, the head of Hong Kong’s de-facto central bank, which is unable to conduct an independent monetary policy because of the Hong Kong dollar’s peg to the U.S. dollar.

The Hang Seng Property Index, which tracks the city’s seven biggest developers, has gained 2.6 percent this year, compared with a 0.5 percent increase in the benchmark Hang Seng Index.

Hong Kong slid into its first recession in more than a decade after the 1997-1998 Asian financial crisis, sending property values more than 50 percent lower until they started recovering in 2003.

To contact the reporter on this story: Sophie Leung in Hong Kong at sleung59@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst in Hong Kong at ppanckhurst@bloomberg.net

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