HKMA Introduces Special Mortgage Scheme for Uncompleted Properties

The Hong Kong Monetary Authority (HKMA) has unveiled a new initiative aimed at providing financial relief to homebuyers of uncompleted residential properties. This one-off special mortgage scheme, announced on December 4, 2024, seeks to relax certain supervisory requirements concerning the maximum loan-to-value (LTV) ratio and debt servicing ratio (DSR) limit, according to the HKMA.

Addressing Market Challenges

The special mortgage scheme comes as a response to a significant drop in official residential property prices, which have plummeted over 25% from their peak three years ago. This downturn has presented challenges for stage payment homebuyers of uncompleted residential properties, who often find that the property's valuation at the time of mortgage application is lower than the original purchase price. Consequently, these buyers face difficulties in securing additional funds for down payments.

Support for Homebuyers

The HKMA's scheme is designed to assist those who purchased properties between January 1, 2021, and December 31, 2023, under stage payment plans and are now encountering financial hardships. Eligible homebuyers can benefit from mortgage loans with an LTV ratio of up to 80% and a DSR limit adjusted to 60%. This offers a crucial lifeline to buyers struggling to complete their property transactions amid declining market values.

Bank Participation and Prudence

Participating banks are encouraged to offer this scheme to homebuyers in genuine need, provided the associated risks are manageable. While the HKMA supports this initiative, it emphasizes that banks must continue to exercise prudence in their mortgage lending practices. Each bank may offer varying mortgage terms, and potential applicants are advised to consult directly with banks participating in the scheme.

A Cautionary Note for Buyers

The HKMA has consistently advised prospective buyers to be cautious when opting for stage payment plans, especially in volatile markets. The agency reminds buyers that if the market value of an uncompleted property falls below the purchase price, the mortgage loan amount will be based on the property's current valuation. Buyers should assess their financial capabilities and be aware of the risks involved in such transactions.

This special mortgage scheme represents an exceptional measure to assist those affected by the recent downturn in the property market, offering a path forward for buyers during challenging times.