Oct 17, 2019 03:50 AM

Hong Kong Raises Mortgages Cap for First-Time Homebuyers

A real estate agents office in the Kowloon district of Hong Kong in January 2019.  Photo: VCG
A real estate agents office in the Kowloon district of Hong Kong in January 2019. Photo: VCG

The Hong Kong government unveiled a package of measures Wednesday to address housing affordability and access issues that have helped fuel the anger behind four months of mass protests.

The move aims to increase home ownership by easing down-payment and mortgage requirements, but some said they worry that it may drive up prices in the world’s most expensive property market.

The government plans to increase the amount first-time homebuyers can borrow for a mortgage under a government-backed insurance program, allowing first-time purchasers to borrow as much as 90% of a property’s value up to a maximum of HK$8 million ($1 million), double the previous limit, according to a report released by Hong Kong's Chief Executive Carrie Lam.

The cap on the value of properties eligible for mortgages of as much as 80% will be raised to HK$10 million from HK$6 million, not limited to first-time homebuyers. The package of measures also includes reducing waiting times for public housing access, increasing land supply and building additional starter homes.

Lam said housing is the “toughest livelihood issue” facing the city’s citizens and pledged to make every Hong Kong citizen “able to have their own home.”

After Hong Kong’s housing prices surged more than 200% in the past decade, many residents have found themselves unable to afford homes or find properties under the value limit eligible for a 10% down payment.

Hong Kong Mortgage Corp. (HKMC), the government-owned mortgage insurance provider, said Wednesday in a statement that the mortgage insurance program is amended in response to market changes and customer demand. “As influenced by the recent external and domestic factors, property market sentiment has become more subdued,” the HKMC said.

The number of property transactions in Hong Kong recorded with the Land Registry in September fell more than 60% from May, before the mass protests began in early June. Morgan Stanley in August predicted a 10% decline in an index of existing house prices through March next year from the peak in June.

The new policy means first-time buyers will be able to purchase more-expensive homes with a down payment of just 10%. But it also raises concerns about potential rising credit risks and making housing less affordable.

Under current rules by the HKMC and the Hong Kong Monetary Authority (HKMA), the city’s de facto central bank, home buyers have to qualify under a maximum debt-to-income ratio. The monthly mortgage payment cannot exceed 50% of the borrower’s household income. Borrowers also have to meet a stressed debt-to-income ratio requiring that no more than 60% of income can be used for mortgage payments, assuming an increase of three percentage points in lending rates.

After the new policy was announced, the HKMA said it “does not consider it appropriate to relax the countercyclical macroprudential measures,” indicating the debt-to-income ratio requirement will remain the same. In a response to a Caixin request for comment, the HKMA called for homebuyers to act in line with their financial ability and not borrow too much.

Lam said in a press conference that the new measures mainly aim to provide more flexibility for those who can afford a house but have difficulty making a large down payment.

With more people now able to afford a down payment, but without an increase in the total housing supply, housing prices may rise, some industry participants said.

After the new policy announcement, some property companies already toughened their tone to potential buyers, with some even considering holding off sales to wait for price increases, a property agent told Caixin.

Boosted by the new policy, transactions on properties valued below HK$10 million are expected to increase by 20% in the second half of October, said Liu Wai-keung, chief executive of Ricacorp Properties, one of the largest real estate agencies in Hong Kong. He said he expects about 1,000 more transactions each month in the next couple of months.

Contact reporter Denise Jia (

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