Cheung Kong Says H.K. Property to Slow on Mortgage Costs

Cheung Kong Holdings Ltd., the developer controlled by Asia’s richest man Li Ka-shing, said Hong Kong’s property market may slow for a couple of months after banks raised mortgage rates.

There was no immediate need for the government to issue more curbs, Executive Director Justin Chiu said yesterday in an interview in Shanghai. The recent measures will ease gains in home prices, Chiu said.

“After raising interest rates, the property market certainly will quieten down a bit,” Chiu said. “The essential impact on buyers is not very big, but more of a mental impact.”

HSBC Holdings Plc, Hong Kong’s biggest bank by assets, Standard Chartered Plc and BOC Hong Kong Holdings Ltd., the city’s largest mortgage lenders, are among those that raised home loan rates by 25 basis points in the past week in response to tighter risk rules. The Hong Kong Monetary Authority on Feb. 22 told banks to maintain the risk weighting for new home loans at a minimum of 15 percent to help protect them against a drop in home values.

Chief Executive Leung Chun-ying, who took over in July as head of the government, on Feb. 22 imposed his toughest yet price-curbing measures by doubling the stamp duty on all property transactions higher than HK$2 million ($257,700). Leung also has pledged to boost land supply in the city.

Transactions Fall

Total home transactions may fall below 3,000 in March and prices may drop as much as 10 percent this year, said Buggle Lau, chief analyst at Midland Holdings Ltd., the city’s biggest publicly traded realtor.

That would be the fewest monthly deals since 2003 when Hong Kong was nearing the end of a six-year property slump brought on by the Asian financial crisis and the Severe Acute Respiratory Syndrome epidemic.

Cheung Kong cut home prices in Hong Kong because as a big developer the company has to take the lead to cooperate with the government, Chiu said. The developer cut prices at its One West Kowloon project by 11 percent on March 5.

“After we cut prices slightly, we sold quite well,” Chiu said. “You don’t win everything every time, we want to see a win-win situation.” Chiu declined to say if Cheung Kong will cut prices further.

The government’s policies are right because they will boost land supply, Chiu said.

Market Risks

“Yet, given the policies of flats with limited floor areas and Hong Kong land for Hong Kong people, there’ll be a lot of supply of smaller apartments while those of medium-size or large apartments will be much less,” he said. “That’ll affect the long-term development of the property market.”

Leung, in October, imposed an extra 15 percent tax on all home purchases by companies and non-permanent residents.

“Risks in the residential property market continue to be a major concern,” the HKMA said yesterday in its half-yearly report. House prices-to-income has reached a ratio of 13.4 at the end of 2012, close to the peak of 14.6 in 1997, with gearing ratio hitting a 12-year high of 60 percent, it said.

Should mortgage rates advance three percentage points, the debt-to-income ratio could reach 80 percent, the de-facto central bank said. HKMA said it will continue to monitor the situation and introduce more measures if needed.

Asia’s property bubbles are created by too much liquidity so curbs are necessary, said Chiu.

Before it's here, it's on the Bloomberg Terminal.