22 January 2015 - Effective from 20 January 2015, The Hong Kong Monetary Authority (HKMA) has adopted new measures to further tighten mortgage lending practices of banks in Hong Kong. Some analysts regard the act as another deterrent to property investors and a way of suppressing inflating property prices.
After reviewing the effectiveness of the debt-servicing ratio (DSR) calculation last amended in 2009, the Authority decided to tighten the discount rate regarding the net rental income of investment properties to at least 30%-40%. The HKMA stated that the current level of 20% is insufficient to cover inflated associated expenses including maintenance cost, government rent and rates, management fees, etc.
In regards to the phenomenon of shell companies being created for the sole purpose of borrowing money for property acquisition or refinancing, the Authority urged banks to strictly assess whether borrowers are true operating companies, and are controlled and reviewed under effective systems.
Mr. Cheung Ho Hei, Managing Director of mReferral Mortgage Brokerage Services commented in an interview with RTHK that the measures pose limited effect on self-use buyers but will cast greater influences on property investors. He expected the Authority to introduce more measures if property prices continue to surge upwards.