Builders Decline as HSBC Lifts Mortgage Rates: Hong Kong Mover

Hong Kong developers fell, heading for their biggest drop in more than four months, after HSBC Holdings Plc raised mortgage rates for the first time in 18 months.

Sun Hung Kai Properties Ltd. (16), the world’s biggest developer by value, fell 3.5 percent to HK$107.70 as of 9:57 a.m. local time. Cheung Kong Holdings Ltd. (1), controlled by Hong Kong’s richest man Li Ka-shing, declined 2.9 percent to HK$113.40. The Hang Seng Property Index, which tracks nine of the biggest builders listed in the city, fell as much as 3.5 percent, the most since Oct. 29.

HSBC, the city’s biggest bank by deposit, yesterday raised home-loan charges priced at the best lending rate by 25 basis points, its first increase since 2011, after the city’s banking regulator tightened risk rules on concern a property bubble may undermine financial stability. Home prices in Hong Kong have doubled in the past four years, prompting the government to impose curbs including extra transaction taxes.

“While the 25-basis-point hike may appear marginal, we see significant impact to the physical market, and increasing risk,” Venant Chiang and Christie Ju, Hong Kong-based analysts at Jefferies Group Inc., wrote in a report yesterday. “The extra cost on mortgages may be insignificant at first, but the impact would become substantial if the rate hike continues -- they usually do.”

Mortgage Rates

New World Development Co., the builder controlled by billionaire Cheng Yu-tung, dropped 4.6 percent to HK$13.38. Sino Land Co., which makes almost all its revenue in Hong Kong, fell 2.5 percent to HK$13.60.

HSBC’s mortgages linked to the best rate will climb to a range of 2.85 percent to 3.15 percent, from 2.6 percent to 2.9 percent, the bank said yesterday.

The Hong Kong Monetary Authority last month told banks to set the risk weighting for new residential loans at 15 percent or more, seeking to strengthen buffers after prices doubled to a record in the past four years.

Hong Kong home prices may fall by as much as 20 percent over 24 months as mortgage rates increase and the government seeks to cool demand, Deutsche Bank AG said in a note today.

To contact the reporter on this story: Kelvin Wong in Hong Kong at kwong40@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net

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