HONG KONG: Hong Kong imposed fresh measures on Friday in its latest bid to cool one of the world's most expensive real estate markets, reducing the amount of money home buyers can borrow and capping the amount of debt they can take.
The former British colony's home prices rose last year to a record high as tightening measures failed to curb skyrocketing prices supported by strong local demand and tight supply.
Home prices have risen nearly 35 percent since 2012, when the city's leader, Leung Chun-ying, took power with a pledge to make housing more affordable. Frustration over the city's widening wealth gap and soaring home prices have sparked widespread protests in Hong Kong.
Fuelled by record high property prices and ultra low interest rates, borrowers have take on more debt, pushing the household debt to GDP ratio to a high of 64 percent.
Norman Chan, chief executive of the Hong Kong Monetary Authority (HKMA), the city's de facto central bank, cut the amount of money home buyers can borrow to 60 percent of the property's value, from 70 percent. The debt-servicing ratio for second-home buyers would be lowered to 40 percent for second-home buyers, from 50 percent, he added.
"The price for small and medium size residential apartments has risen by 12 percent in the second half of 2014, and the average monthly transaction volumes have increased to more than 6,000 apartments in the second half from 4,400 apartments in the first half," Chan told a news conference.
The HKMA also reduced the amount of debt that borrowers can service to 40 percent from 50 percent for all mortgage loans taken for non self-use properties. All measures will be effective from Friday.
Hong Kong's latest measures are an indication of growing concerns among the region's policymakers ahead of an expected US central bank interest rate hike later this year.
The city's currency is pegged to the US dollar and rises in US interest rates would cause domestic rates to rise, increasing mortgage payments for home owners.
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