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Following the Government's announcement of new measures to cool the overheated property market on 13 August, transaction volumes dropped, a sign which shows that these measures to cool the market are effective. However, as external factors remain unchanged, it is, for the time being, difficult to reverse the megatrend of soaring property market. The Monetary Authority of Hong Kong(HKMA)should require banks to comply with the guidelines on mortgages and lending so that the risks of non-performing home mortgages can be minimized and a better protection can be given to both the financial system and the users. This can avoid large amounts of negative assets and bankruptcies in time.
On 13 August, the Government and HKMA introduced measures to curb speculation including tightening the mortgage requirements of residential properties worth HK$12 million or above and other properties not to be occupied by the buyers. It is hoped that the speculation spree will recede. Under the low interest rate environment, H.K people may not have fully assessed their abilities to repay when making purchase decisions, and the banks will always be happy to approve loans. Once the interest rate rebounds, a large amount of negative assets or even early termination of mortgages may arise, posing threats to the financial stability of both the people and the banks. The new measures lower the loan repayment ratio to a uniform 50% of the income of the buyer. In addition, banks are required to undergo stress test. The new regulation targets at the repayment ability of home buyers. These measures deter buyers from ignoring risks and making purchase decision beyond limits, and assure the stability of the financial system.
The attempt to cool the property market on various fronts may achieve certain effects. Hong Kong, as an open economy, cannot stop the inflow of funds and it is possible that the property market will be back on the rising trend. To protect the economy from impacts brought by the high fluctuation of the property market, the authorities must strengthen the regulation on banks in their lending to home buyers and require banks to heighten the restrictions on property mortgages, strictly examine the repayment abilities of the buyers and lay down higher safety factors for home buying and bank loans. ■Translation by開明 ■chi.ming818@gmail.com
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