For the first time since 2009, the Hong Kong Monetary Authority is now easing the city's financing rules for non-home properties. The move is aimed at supporting the rebound of Hong Kong's commercial property market after months of decline following the economic recession caused by the coronavirus pandemic.
The city's de facto central bank announced on Wednesday that it will be increasing the lending amounts banks are allowed to issue for non-residential properties. In a statement, the HKMA stated that it will be increasing the so-called loan-to-value ratio from the previous 40 percent to 50 percent starting today, August 20.
The change will be the first time the HKMA has rolled back some of its original tightening measures imposed to curb price speculation in the property market. The HKMA clarified that the lifting of the loan-to-value ratio will only apply to factories, retail spaces and offices. It stated that these types of properties had seen the most price corrections over the past four quarters after the city's economy had shrank due to the pandemic.
HKMA's chief executive officer, Eddie Yue WAi-man, said in a statement that the city's non-residential property markets are facing immense challenges given the prolonged pandemic and the rising geopolitical tensions. For this reason, the bank has decided to at least ease some of its financing rules to allow property owners and developers to gain more liquidity. Unlike residential properties, which have remained relatively stable, non-home properties have dropped by more than 10 percent since its peak in May of last year.
Major banks such as the Bank of China and HSBC fully support the HKMA's move, stating that the decision was timely given the state of the city's economy. HSBC stated that it welcomed the news, describing it as an appropriate response to the changes in the city's non-residential property market. The Bank of China stated that higher loan caps should increase confidence in the industry and allow for more activity.
While most have approved the HKMA move, some players in the property market have called it insufficient to address the industry's dire circumstances. Midland Realty stated that transactions in the office market remain almost non-existent given the business disruptions caused by the pandemic. The company stated that the situation is significantly worse than the SARS epidemic and the HKMA's minor policy change will do little to prevent more shops from becoming empty in the coming months.
