Hong Kong Says Loans to Mortgage Companies May Undermine Curbs

July 23, 2013 Leave a comment

Hong Kong Says Loans to Mortgage Companies May Undermine Curbs

Hong Kong banks’ support for mortgage lending by finance companies may reduce the effectiveness of home-lending controls, the city’s banking watchdog said.

“If banks provide loans to finance companies to support their mortgage business and these finance companies do not follow the Hong Kong Monetary Authority’s guidelines on property mortgage lending, this may undermine the effectiveness of the prudential measures,” the regulator said in an e-mailed statement yesterday. The HKMA “does not encourage banks to provide loans to these finance companies,” it said.Hong Kong’s government is trying to curb property prices in the world’s most expensive housing market, after low mortgage costs, a shortage of real estate and an influx of buyers from mainland China prompted house prices to more than double since the beginning of 2009.

The HKMA asked lenders for information on financing provided to companies that offer mortgages, the Oriental Daily newspaper reported yesterday, citing unidentified people.

Hong Kong Chief Executive Leung Chun-ying in February doubled stamp duty on all property transactions higher than HK$2 million ($257,800) and the HKMA tightened mortgage terms for commercial properties and parking spaces.

The regulator also required banks to lower the maximum mortgage loan-to-value ratio on commercial properties by 10 percentage points. It limited the maximum mortgage for parking spaces to 40 percent of the value, with a 15 year-cap on the length of the loan.

Property transactions in the city plunged to a two-decade low in the second quarter as the measures took effect, prompting thousands of real estate agents and industry workers to march in a protest this month, calling on the government to lift the controls.

The regulator “requires banks to submit not only regular statutory returns, but also additional information as and when the situation warrants, so as to enable the HKMA to accurately assess the risks associated with banks’ different lines of businesses,” it said in yesterday’s e-mail.

To contact the reporter on this story: Rachel Evans in Hong Kong at revans43@bloomberg.net

Filed under Macro Trends

Unknown's avatarAbout bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

Leave a comment