Hong Kong Monetary Authority: Revision of Countercyclical Macroprudential Control Measures Applicable to Property Mortgage Loans

The Zhitong Finance App learned that on October 16, the Hong Kong Monetary Authority issued guidelines to banks to revise countercyclical macroprudential supervision measures applicable to property mortgage loans. Yu Weiwen, Chief Executive of the Hong Kong Monetary Authority, said that the Hong Kong Monetary Authority decided to revise the countercyclical macroprudential supervision measures for property mortgage loans in line with market developments to restore the maximum mortgage ratio and the upper limit of the “contribution to income ratio” to the level before countercyclical measures began to be implemented in 2009. Even with the measures announced today, the Hong Kong banking system still has sufficient buffers to meet the challenge of a drastic adjustment in property prices. At the same time, Yu reminded the public that buying a home is a long-term undertaking. When making a decision to buy a property, they should carefully assess the risks and do what they can.

The residential property market has improved slightly since February 2024, when the Hong Kong Government lifted residential property demand management measures and the Hong Kong Monetary Authority revised regulations on property mortgage loans. Residential property transactions increased from an average of 3,300 per month in the first quarter of 2024 to an average of 6,000 per month in the second quarter. As market sentiment softened, volume fell back to an average of 3,400 transactions per month in the third quarter. Official residential property prices fell 6.2% in the first eight months of 2024, a cumulative adjustment of 26.6% from the 2021 high. The non-residential property market also continued to adjust, with prices for office buildings, multi-storey factory buildings and retail properties falling further by 17.5%, 11.8% and 13.0% respectively in the first eight months of 2024. Furthermore, the surrounding environment still faces many uncertainties, including that the pace of US interest rate cuts is still quite variable.

The Hong Kong Monetary Authority mentioned that countercyclical macroprudential supervision measures for property mortgage loans are to take appropriate measures according to market conditions to ensure that banks properly manage risk, and on the other hand, to minimize the impact of measures on the normal property trading activities of the public. Based on various considerations, the Hong Kong Monetary Authority believes that, on the premise of continuing to maintain the stability of the banking system and proper management of property mortgage loan risks, there is currently room to further revise countercyclical macroprudential supervision measures:

First: For all residential properties, regardless of the value of the property and whether it is for personal use, the maximum mortgage ratio is uniformly 70%.

Second: The maximum mortgage ratio for property mortgage loans based on “asset level” was raised from 60% to 70%, in line with property mortgage loans based on “contribution to income ratio”. This amendment applies to all residential and non-residential properties (including office buildings, shops, industrial buildings, etc.).

Third: The upper limit of the “contribution to income ratio” for non-personal use properties was raised from 40% to 50%, in line with the upper limit of the “contribution to income ratio” for private use properties. This amendment applies to all residential and non-residential properties.

Fourth: Cancellation of the applicable maximum mortgage ratio and the “contribution-to-income ratio” requirement of 10 percentage points if mortgage applicants lend or guarantee other mortgaged properties when applying for a mortgage.

After the revision, the maximum mortgage ratio for all residential and non-residential properties was uniform at 70%, and the “contribution-to-income ratio” limit was uniform at 50%.

The above amendments take effect immediately and apply to property transactions for which temporary sales contracts are signed today or later. The relevant amendments also apply to mortgage applications for real estate properties that have previously been entered into provisional sales contracts and are expected to be completed today or later.

The Hong Kong Monetary Authority will continue to closely monitor market developments and will introduce appropriate measures to ensure the stability of the banking system in line with the latest developments in the property market.