Mortgage insurance for residential property in Hong Kong continues to rise amid a jump in transactions following the removal of cooling measures, hitting a 10-month high in April.
Newly approved mortgage insurance rose 53 per cent in value to HK$13.71 billion (US$1.75 billion) and 47 per cent to 2,613 in terms of applications in April, compared with February, according to data from mortgage broker mReferral on Thursday. It was the highest since HK$16.07 billion from 2,847 cases recorded in June last year.
The increase comes on the back of a surge in sales of new and second-hand homes in Hong Kong, which jumped 115 per cent month on month to 8,551 units in April, according to Land Registry data released on Friday.
In his budget speech on February 28, Financial Secretary Paul Chan Mo-po announced the lifting of all property curbs put in place more than a decade ago to cool an overheated market. The Hong Kong Monetary Authority simultaneously eased mortgage financing, making homes valued at less than HK$30 million eligible for 70 per cent mortgage financing, compared with the previous cap of 60 per cent for homes valued between HK$15 million and HK$30 million.
Under the Hong Kong Mortgage Corporation’s mortgage insurance programme, the insurance aims to protect banks from losses, on the portion of the loan over the 70 per cent loan value in case of defaults by borrowers.
While the numbers are on the rise, they are nowhere near last year’s level. In the first four months of the year, newly approved mortgage insurance amounted to HK$43.43 billion from 8,450 cases, the lowest for the first four months of the year since 2019. The comparable data for the January to April period last year was more than double, at HK$96.91 billion from 17,498 cases.
“Property transactions in both the first and second-hand markets have picked up after the withdrawal of all property cooling measures,” said Tso Tak-ming, chief vice-president of mReferral. “This has led to a significant increase in demand for mortgages, as the proportion of new buyers in the primary market choosing the immediate payment method for uncompleted residential buildings has increased significantly.”
In addition, buyers of new flats who chose stage payment some years ago have started to move in as these residential buildings have been completed, which has also led to an increase in the number of mortgages, he said.
“But the property market seems to be slowing down a bit after a surge in March and April,” Tso said, adding that the number of mortgages will gradually increase this quarter.
A widely followed official gauge of Hong Kong’s secondary homes showed prices increased by an average 1.06 per cent in March, the first rise in 11 months as the removal of cooling measures gave a much-needed boost to the beleaguered property market.
The index climbed to 305.7 from 302. 5 the previous month, according to the Rating and Valuation Department. The increase was broad-based, with all sizes of homes seeing gains.
However, prices are still 13.2 per cent lower than a year ago and 23 per cent off from an all-time high in September 2019. So far this year, they have slipped by about 1.8 per cent.
