In a bid to encourage more people to purchase a home and to stimulate the city's property market, Chief Executive John Lee on Wednesday said the government would relax the maximum loan-to-value (LTV) ratios of mortgage loans.

This would allow people to borrow more against the value of a property they want to buy.

Outlining the proposal in his Policy Address, Lee said the Hong Kong Monetary Authority (HKMA) would adjust the maximum LTV ratio for homes to 70 percent, regardless of their value, whether the properties were for self-use or not, or were being purchased by first-time buyers.

The maximum debt servicing ratio (DSR) would be adjusted to 50 percent.

For non-residential properties, the maximum LTV ratio and the maximum DSR would be adjusted to the same levels.

The HKMA said the adjustments apply to provisional sale and purchase agreements signed from Wednesday.

"Taking into account the latest market developments, the HKMA has decided to adjust the countercyclical macroprudential measures for property mortgage loans and revert the maximum LTV ratio and DSR limit to the pre-2009 levels before the countercyclical macroprudential measures were first introduced," HKMA chief executive Eddie Yue said in a statement.

"Even with these adjustments announced today, the Hong Kong banking sector has ample buffers to cope with any challenges from a sharp correction in property prices.

"I would like to remind the public that buying a property is a long-term financial commitment. Prospective buyers should carefully assess the risks involved and their ability to afford a property."

Lee also announced that the government will relax a policy granting residency to people who invest a minimum of HK$30 million in different forms of assets.

Starting from Wednesday, purchases of property worth HK$50 million or more will be counted as fulfilling a third of the requirement for the New Capital Investment Entrant Scheme. The amount of real estate investment to be counted towards the total capital investment is capped at $10 million.

Speaking on a TV forum, Lee brushed off concerns that the relaxation could lead to an overheating of property prices.

"Because their investment will not affect the willingness of our citizens to buy houses. We only allow them [investors] to buy properties valued over HK$50 million," he explained.

"Right now, the property market is starting to stabilise. We are not worried that will result in any negative impact. I think that will attract more investment while benefiting the growth of our real estate market."
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Last updated: 2024-10-16 HKT 22:09