Hong Kong Tightens Investor Mortgage Rules Amid Record Prices

Hong Kong tightened mortgage lending rules, restricting the amount that banks can lend to property investors amid record home prices in the city.

Lenders should raise the discount they apply to rental income when calculating the size of an investor’s mortgage to 30 percent from 20 percent, the Hong Kong Monetary Authority said in a letter posted yesterday on its website. The discount, which applies to both residential and non-residential property, should increase to 40 percent if there’s no proof of rental income, the HKMA said.

The impact of the new measure on Hong Kong property prices will probably be small, as investors make up only 3 percent to 5 percent of the property loan market, according to Shermaine Lau, chief economic analyst of mortgage broker mReferral Mortgage Brokerage Services.

“It might affect sentiment as it may seem like a bit of tightening,” she said. “It’s more of a kind reminder to banks to manage their risks and to close some loopholes.”

Hong Kong home prices surged to record levels last year despite several rounds of property curbs imposed by the government since 2010. They include taxes on foreign buyers purchasing property in Hong Kong.

The city’s Chief Executive Leung Chun-ying is leading a push to increase housing supply and said last week in his policy speech that the government will take measures to rein in the property market when necessary.

The new requirement doesn’t “constitute a new round of countercyclical measures,” the HKMA said.

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