Loans cap up as luxury units face higher rates

First-time homebuyers can borrow up to 90 percent of the price of a property, up to HK$10 million from HK$8 million at present, with mortgage insurance while a progressive rating system targeting luxury homes comes into play in two of the standout budget measures to affect the sector.

The maximum property value eligible for mortgages up to an 80 percent loan-to-value ratio has also been raised to HK$12 million from HK$10 million.

The changes will apply to those buyers who opt for completed residential properties through the Mortgage Insurance Programme of the Hong Kong Mortgage Corp with immediate effect.

Some owners increased home asking prices post budget even though the market has remained dull amid the fifth virus wave.

The relaxations were made taking into account the market situation, supply in the next few years and the need to provide assistance for buyers and families looking to upgrade, Paul Chan said.

But there is no plan to relax other property demand management measures, he said, adding the easing of curbs gives those who wish to enter the market more options but not so much as to fuel speculation.

Real Estate Developers Association executive committee chairman Stewart Leung Chi-kin welcomed the decisions, saying he doesn't think the intention is to "prop up the market" as to help more people to get on the property ladder as prices spiral.

The Wheelock Properties chairman said the firm would not move to expand home sizes in its projects simply because of the amendments.

Louis Chan Wing-kit, Asia-Pacific vice-chairman of residential at Centaline Property Agency, said the change could stimulate the small and medium-sized market and expected transaction volume of under-HK$12 million homes to increase by 30 percent, offsetting a Covid downturn.

Paul Chan expects about 42,000 homes, or 2 percent of Hong Kong residential units, will be taxed more under the proposed progressive rating system and bring in HK$760 million more in revenue each year.

Rates will stay at 5 percent for units with rateable values of HK$550,000 or below. For those above this level, it will be 5 percent on the first HK$550,000, 8 percent on the next HK$250,000, and 12 percent on rateable values exceeding HK$800,000.

He said the middle-class like homeowners of Taikoo Shing will not be affected.

The progressive tax system will be introduced in the second half of 2024-25.

From 2023-24, only non-corporations can apply for rates concessions for one property under their name, unlike now.

Primary legal responsibility for rates payments has not been shifted from tenants to landlords, as some 400,000 tenancy deals will need to be amended, which would be inconvenient and impractical, sources have been quoted as saying.

Chan also said 13 residential and four commercial sites, capable of providing 8,000 units and 300,000 square meters of commercial space, will begin development next year.

He will set aside HK$100 billion from the cumulative return of the Future Fund for a dedicated fund under the Capital Works Reserve Fund to expedite infrastructure works within the Northern Metropolis.

As for reclamation in central waters of Lantau Tomorrow, the expectation is that the preliminary proposal will be put forward in the fourth quarter. Streamlining of procedures are also being considered to fast track the first phase of reclamation before the 2027 originally envisioned and the first batch of population intake before 2034.

Moves are also afoot to identify sites in Hung Shui Kiu and Yuen Long for multistory buildings mainly for logistics, automobile repair industries and other appropriate uses, as well as for brownfield site business operators affected by land resumption.