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 Judging from the interest rates environment, the property market in Hong Kong faces risks worse than those seen in 1997, said Norman Chan, director of the Hong Kong Monetary Authority.

The Hong Kong property market experienced reversals in 2011, and although the market slightly declined in March and April, it showed signs of heating up after the government sold land at high prices. The Hong Kong's housing prices have exceeded 1997 levels.

Chan said that the HKMA has taken four measures to tighten housing mortgage loans starting from 2009. The new policies that began on June 10 lowered the maximum mortgage ratio of houses worth more than 10 million Hong Kong dollars to 50 percent and reduced the maximum mortgage ratio of houses worth 7 million Hong Kong dollars to 10 million Hong Kong dollars to 60 percent and limited the maximum loan amount to 5 million Hong Kong dollars. 

It also formulated that people who purchase houses worth no more than 7 million Hong Kong dollars can apply for 70 percent mortgage loans with a maximum loan amount of no more than 4.2 million Hong Kong dollars.

The highlight of the new measure is that if the main source of income of the mortgage loan applicant is not from Hong Kong, their maximum mortgage ratio should be lowered at least 10 percent compared with the applicable standards. This is considered as the "credit limit" regarding non-local residents.

Chan said that as the current property prices are high while the interest rates are low, residents that purchase houses with loans feel that the monthly repayment burdens are relatively light. However, the current interest rates will not become even lower. The repayment burden will become heavier if the housing prices decline and the interest rates rise again. 

In the past, people could reduce their repayment burden through lengthening the repayment period. However, as the current mortgage repayment period is very long, there is not much room for adjustments.

By Qi Shuwen, People's Daily Online 


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