HSBC Boosts Mortgage Rates for the first time in 18 months as Hong Kong Cools Property Market

March 13, 2013 Leave a comment

HSBC Boosts Mortgage Rates as Hong Kong Cools Property Market

HSBC Holdings Plc (5) increased Hong Kong mortgage rates for the first time in 18 months after the city’s banking regulator tightened risk rules on concern a property bubble may undermine financial stability.

Home loans priced at the best lending rate will rise to a range of 2.85 percent to 3.15 percent, from 2.6 percent to 2.9 percent, starting tomorrow, according to an e-mailed statement from the bank. The increase is the first since September 2011, Yvonne Chuang, a Hong Kong-based spokeswoman for the second- largest mortgage lender in the city, said by telephone.

The Hong Kong Monetary Authority on Feb. 22 told banks to set the risk weighting for new residential mortgages at 15 percent or more, to ensure lenders’ capital cushions are deep enough. Standard Chartered Plc last week said the measure will increase its home loan funding cost by a range of 20 basis points to 25 basis points, indicating banks may need to boost mortgage rates.

Since taking office in July, Hong Kong Chief Executive Leung Chun-ying has added property taxes, favored local permanent residents over foreigners, tightened mortgage rules and increased supply after home prices doubled in the past four years.

HSBC ranked second in the city’s home loan market last month with a 17 percent share, while Standard Chartered was in fourth position with 13 percent, according to Hong Kong-based mReferral Mortgage Brokerage Services.

Borrowing costs in Hong Kong are close to record lows because the Hong Kong dollar’s peg to the U.S. currency ties monetary policy to the Federal Reserve, even as the economy is driven by China’s growth.

Government Auction

Kerry Properties Ltd. (683), the developer controlled by Malaysian billionaire Robert Kuok, won a tender for a residential site in Hong Kong’s Ho Man Tin area for HK$11.7 billion ($1.5 billion), the government said in an e-mailed statement today. The price is equivalent to about HK$10,200 per buildable square foot, said Alvin Lam, a surveyor at Centaline Property Agency Ltd., the city’s biggest closely held realtor.

“It shows developers are still confident about the market despite all these curbs,” Lam said. “The per square foot price is not as crazy as the sites sold in the past couple years but the fact that someone is still willing to invest such a big amount in real estate means they don’t see prices crashing anytime soon.”

The site is the first sold by the government since Feb. 22, when it doubled stamp duty taxes on all property transactions exceeding HK$2 million and raised mortgage down payment requirement on some properties.

To contact the reporter on this story: Stephanie Tong in Hong Kong at stong17@bloomberg.net

Filed under Macro Trends

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