Hong Kong's mortgage loans dropped to the lowest in almost three years as the city’s property curbs deterred buyers in the world’s most expensive housing market.
New mortgage drawdowns declined 16 percent to HK$8.9 billion ($1.1 billion) last month, according to a statement from the Hong Kong Monetary Authority today. That’s the lowest since February 2009, when the figure fell to HK$7.1 billion. New loans approved slipped 13 percent to HK$10.4 billion.
Home prices in Hong Kong increased 70 percent between the beginning of 2009 and their 14-year-high in June, and have since fallen as increased borrowing costs and taxes deterred buyers. The government tightened mortgage-lending requirements and restarted scheduled land auctions, which were halted in 2004, to help slow surging prices. Banks including Standard Chartered Plc also raised mortgage rates.
“It’s a series of measures, so the latest data isn’t a surprise with the significant drop in market transactions in the past six months,” said Buggle Lau, chief analyst at Midland Holdings Ltd., Hong Kong’s biggest publicly traded realtor. “The measures not only affected the speculators but some genuine end users as well, who are adopting the wait-and-see approach. No one will make a decision at this time.”
The Hong Kong government withdrew the tender for a property project at a subway station this month and sold another site for less than estimated, underscoring concern that home prices in the city may fall further. The government is one of the city’s biggest suppliers of unoccupied land for housing. MTR Corp., Hong Kong’s railway operator, sells land to developers for a portion of their profit from the resulting projects.
Home prices in Hong Kong, ranked by Savills Plc as the world’s most expensive, may fall as much as 25 percent by 2013, according to Andrew Lawrence, a Hong Kong-based analyst at Barclays Capital Research.
The Hang Seng Property Index, which tracks the seven biggest builders in Hong Kong, gained 14 percent this year, compared with the 11 percent advance in the benchmark Hang Seng Index, of which it’s a component.
Housing transactions plunged 51 percent in October from a year earlier to the least since February 2009, according to Land Registry data. Home prices may need to fall as much as 10 percent in 2012 before buyers are lured back, Benjamin Hung, chief executive officer of Standard Chartered’s local unit, said in an interview on Dec. 13. Barclays Capital forecasts prices could sink as much as 30 percent by 2013, according to Lawrence.
Midland expects home prices to be little changed this year, with gains or declines limited to “single digits,” Lau said.
“We believe there will be a little bit of a rebound but the overall market really depends on how the policy goes,” he said. “The economy isn’t that bad, unemployment is still low, income is on the rise, so it’s a fairly stable environment.”