HK Mortgage Lending Falls For A Fourth Month

Source : The Business Times, December 30, 2008

38% plunge in Nov comes as home prices slide a quarter from five-year high

(HONG KONG) Hong Kong mortgage loans fell for a fourth month in November as banks tightened lending amid the economic slowdown and as property prices slumped.

The writing on the wall: A property agent at his office in Hong Kong. The outlook for mortgage lending in the city will likely worsen as unemployment rises and banks raise interest rates on home loans

Banks in Hong Kong approved HK$8.5 billion (S$1.57 billion) of new mortgage loans last month, 69 per cent less than a year earlier, figures from the Hong Kong Monetary Authority (HKMA) show. Loans fell 38 per cent from October, the HKMA said yesterday.

House prices in the city have slumped almost a quarter from a five-year high in March as the global credit crisis drives up unemployment and threatens more loan defaults. Existing home sales for the full year may fall almost 18 per cent to 75,160 units, according to a Dec 20 report by Centaline, one of the city's biggest real estate agencies.

'Banks are not willing to take on this business as margins don't amount to much and housing prices will adjust in this climate,' Yuk Kei Lee, a Hong Kong- based analyst at Core Pacific-Yamaichi International, said before the HKMA's announcement.

The outlook for mortgage lending will likely worsen as unemployment rises and banks raise interest rates on home loans. HSBC Holdings plc, which has the biggest bank network in the city, earlier this month raised mortgage rates as much as 75 basis points to maintain loan profitability.

The proportion of new loans approved at more than 2.5 per cent below the best lending rate fell to 15 per cent in November, from 90.9 per cent a year earlier and 51.7 per cent in October, HKMA figures show.

Hong Kong lending in October posted the first month-on-month decline since December 2007, the HKMA said. Total lending climbed 7 per cent to HK$3.41 trillion, the slowest growth since May 2007, from HK$3.19 trillion a year earlier, figures from the HKMA showed last month.

Hong Kong Chief Executive Donald Tsang said on Dec 8 a recession in 2009 is 'inevitable' because of the global financial crisis, and forecast the economy will recover in 2010.

The city's economy last month entered its first recession since the outbreak of the deadly Sars epidemic in 2003. The seasonally adjusted unemployment rate in the city of seven million people rose to 3.5 per cent in the three months ended Oct 31, the highest level in almost a year.

The number of homeowners with apartments worth less than the mortgages they borrowed - negative equity - almost doubled in the third quarter to an estimated 2,568 cases worth HK$6 billion, the HKMA said on Nov 21. -- Bloomberg