Quick Take: Hong Kong Not Considering Easing Restrictions on Homebuyers

The Hong Kong government is not considering letting homebuyers pay less upfront when purchasing residential properties, the city’s Financial Secretary Paul Chan said.

Chan’s comment aimed to dispel speculation that the authorities are planning a cut to the minimum down payment that has grown since Oct. 12, when the city’s Chief Executive Carrie Lam said in her annual policy address that the government would roll out measures to help the less affluent buy their first home.

Chan said Sunday that Hong Kong’s home prices are at “extremely high levels.” If restrictions are eased now, more people who are “economically less capable” might be able to buy their first homes at these elevated prices, which would be “dangerous,” he said.

Around 98,000 new homes will come onto the market over the coming three to four years, more than in previous years, he said. Increased supply normally suppresses prices.

He added that potentially higher U.S. interest rates in the near future may push up Hong Kong interest rates, which will add to the mortgage burden on homeowners.

Under current Hong Kong law, a home that costs HK$7 million ($897,000) or less cannot be mortgaged for more than 60% of its value. This percentage falls to 50% when the property costs HK$10 million or more. For the less affluent, they can mortgage their home for up to 90% of the value if they enroll in a government-backed mortgage insurance scheme.

According to Hong Kong government data, the city’s home price index hit new high in August, after rising for 16 straight months.

Contact reporter Aries Poon (ariespoon@caixin.com)