Hong Kong tightenslendingon luxury homes

Hong Kong's government has
announced measures aimed at
cooling the property market as
low interest rates have spurred
a dramatic surge in prices and
fears of a possible bubble.
The Hong Kong Monetary
Authority said it had sent a
circular to banks on Friday telling
them to cut the amount they
lend to buyers of luxury homes
with immediate effect.
Loans on properties valued at
20 million dollars (2.6 million US)
or more would be capped at 60
per cent, down from 70 per
cent. For cheaper properties the
maximum loan would remain 70
per cent but would be capped at
12 million dollars.
The HKMA, Hong Kong's de
facto central bank, also
reminded banks to exercise
prudence when valuing
properties and calculating
borrowers' ability to repay loans.
'These are prudential
measures designed in the
interest of maintaining banking
stability, to enhance banks' risk
management on mortgage
lending to high-end residential
properties,' HKMA chief executive
Norman Chan said in a
statement.
Record-low interest rates
have helped drive up prices by
41 per cent in the luxury
property sector while the mass-
market segment has risen more
than 27 per cent, according to
property agencies and
consultants cited by the South
China Morning Post.
The government-owned Hong
Kong Mortgage Corporation
meanwhile announced that from
Saturday it would stop offering
insurance to property investors
and reduce its maximum
mortgage size from eight million
to six million and from 20 million
to 12 million under its mortgage
insurance schemes.