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Thread: Hong Kong banks increase interest rates for home loans

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    Default Hong Kong banks increase interest rates for home loans

    Published March 23, 2013


    Major HK banks increasing rates for home loans
    Residential property prices could drop by up to 20% in next two years, helping city officials to rein in escalating housing values

    [HONG KONG] AFTER struggling in vain for three years to slow the growth in home prices, Hong Kong officials are about to get their wish as the biggest banks in the city raise mortgage rates.
    Prices could fall as much as 20 per cent over the next two years, according to Deutsche Bank AG, after lenders including HSBC Holdings, Hong Kong's biggest by assets, and Standard Chartered raise their home loan rates by 25 basis points in response to tighter risk rules.

    Hong Kong dollar's peg to the US currency has kept interest rates in the city at near record lows, underpinning a more than 110 per cent gain in home prices since the beginning of 2009 to the most expensive among major global cities. Low mortgage costs, coupled with a property buying spree driven by mainland Chinese, have seen home prices shrug off repeated attempts by the government since 2010 to stymie escalating housing values amid an outcry over affordability.

    "You have this pile of measures plus higher interest rates; this will be a big challenge for the market," said Buggle Lau, chief analyst at Midland Holdings Ltd, the city's biggest publicly traded realtor, which predicted that as many as one third of real estate agent branches in Hong Kong will close.

    Chief Executive Leung Chun-ying, who took over in July as head of the government, imposed his toughest price-curbing measures yet on Feb 22 by doubling the stamp duty on all property transactions higher than HK$2 million (about S$322,000). On the same day, the Hong Kong Monetary Authority told banks to maintain the risk weighting for new home loans at a minimum of 15 per cent to help protect them against a drop in residential property values.

    London-based HSBC was the first among Hong Kong's lenders to lift rates from March 14. Its mortgages linked to the best lending rate climbed to a range of 2.85 per cent to 3.15 per cent, while at Standard Chartered, also headquartered in London, they are from 3.1 per cent to 3.5 per cent.
    BOC Hong Kong Holdings, the city's largest mortgage lender, increased its prime-linked mortgage rate to 2.4 per cent to 3.05 per cent, according to a March 20 statement.

    Hang Seng Bank, controlled by HSBC, has raised its mortgage rates to 2.4 per cent to 3 per cent. Bank of East Asia upped its prime rate-linked mortgage terms to 2.9 per cent to 3.4 per cent. Major banks in Hong Kong last lifted mortgage rates in November 2011.

    "Banks were mispricing their retail mortgage loans," Sebastian Paredes, chief executive officer for Hong Kong at DBS Group Holdings Ltd, South-east Asia's largest bank, said in a March 8 interview. "Now with the new measures from HKMA, they will be forced to correct it."
    The rate increases may finally put a dent in prices, which have climbed 16 per cent since Mr Leung was sworn in on July 1, according to an index compiled by Centaline Property Agency Ltd.

    "With the new government measures, the potential further rises in mortgage rates, and the expected increases in new supply in the medium term, we expect property prices to show larger corrections," Tony Tsang and Jason Ching, analysts at Deutsche Bank, wrote in a March 13 report.
    A 60-square-metre apartment on Hong Kong Island cost about HK$125,000 per square metre in January, according to the Rating and Valuation Department. By that calculation, it would cost about HK$7.5 million (US$970,000) on average. An equivalent-sized apartment in Manhattan would cost about US$700,264, according to Miller Samuel Inc and brokerage Douglas Elliman Real Estate.

    Since 2010, Hong Kong has imposed an extra tax of up to 20 per cent of the value of homes on buyers who resell them within three years after purchasing, and raised the minimum downpayment requirement on mortgages for homes valued at more than HK$7 million. In October, Mr Leung, imposed an extra 15 per cent tax on all home purchases by companies and non-permanent residents, and promised to raise land supply for private development and to build more government housing.
    While the impact on prices has yet to surface, the measures have reduced transactions. The average number of homes changing hands every month fell to 6,777 last year from 7,039 in 2011 and 11,315 in 2010.

    Total home transactions may fall below 3,000 this month and prices may drop as much as 10 per cent this year, said Midland's Mr Lau. That would be the fewest monthly deals since 2003 when Hong Kong was nearing the end of a six-year property slump brought on by the Asian financial crisis, the burst of the dotcom bubble and the Sars epidemic.

    Developers are responding. Cheung Kong Holdings , the builder controlled by Li Ka-Shing, the territory's richest man, cut prices at one of its projects by 11 per cent on March 5, while Sun Hung Kai Properties, the city's biggest builder by value, on Feb 28 cut its target for the fiscal year ending June by 8.6 per cent to HK$32 billion. New World Development lowered its sales target in response to the curbs.

    Macquarie Securities has an underweight rating on Hong Kong's property market and is expecting home prices to drop 10 per cent in 2013, said analyst David Ng. - Bloomberg

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    Won't be surprised if MAS will to ask all our major banks do likewise. It is not good for Singapore if Hong Kong's loan rates are much higher than us.

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    so this is going to be the start of higher interest? SG is usually one step behind HK in pty curbs

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    25bps increase will result in 20pc correction? very bold prediction by bears
    Ride at your own risk !!!

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    Quote Originally Posted by phantom_opera
    25bps increase will result in 20pc correction? very bold prediction by bears
    will singapore follow

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    Sg banks has been raising their spread. Expect spread to increase further to 1.25% or even 1.5% if low interest rate stays. Does not affect earlier buyers.

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    Quote Originally Posted by hutsutau
    will singapore follow
    sibor pegged to us short term rate
    Ride at your own risk !!!

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    Quote Originally Posted by phantom_opera
    sibor pegged to us short term rate
    I thought both hk and sg follow the us interest rate. How come now they suka suka can go increase rates

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    Quote Originally Posted by hutsutau
    I thought both hk and sg follow the us interest rate. How come now they suka suka can go increase rates
    They increase bank spread.

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    Lo Liao ah! Ah B, Ah Tan, seletar reservoir keen ah! ma GAO MTB ho..

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    Quote Originally Posted by hutsutau
    will singapore follow

    Singapore always follow hong kong. I can bet 100% they will ask local banks to increase mortgage rates.
    狮子王 (formerly blackjack21trader): READ MY LIPS: NO MORE CRASH FOR 60 YEARS.

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    Best to get low spread throughout tenure deals while it last.
    SIBOR will stay low but spread will increase during refinancing.

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    Spread may increase... Board rate can also increased too? This is bad

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    Quote Originally Posted by sgbuyer
    Singapore always follow hong kong. I can bet 100% they will ask local banks to increase mortgage rates.
    U mean like hk 25bps increase?

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    Quote Originally Posted by indomie
    U mean like hk 25bps increase?

    Definitely not more than 25bps, but anywhere between 10bps to 25bps.
    狮子王 (formerly blackjack21trader): READ MY LIPS: NO MORE CRASH FOR 60 YEARS.

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    Banks huat. But you need more like 250bps hike lah.

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    Why kill the golden goose, feed the golden goose more to lay more egg.

    The taxman collected about $110 million in additional buyer's stamp duty between Dec 8 last year - when ABSD took effect - and March 31 this year. The sum includes $66.2 million in ABSD from foreigners who bought 369 private homes over the near four-month period.

    http://www.asiaone.com/Business/My%2...13-339540.html

    Friday, Apr 13, 2012
    The Business Times

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    Quote Originally Posted by Arcachon
    Why kill the golden goose, feed the golden goose more to lay more egg.

    The taxman collected about $110 million in additional buyer's stamp duty between Dec 8 last year - when ABSD took effect - and March 31 this year. The sum includes $66.2 million in ABSD from foreigners who bought 369 private homes over the near four-month period.

    http://www.asiaone.com/Business/My%2...13-339540.html

    Friday, Apr 13, 2012
    The Business Times

    Sure, maybe instead of asking banks to hike rate. Taxman can impose a 25 bps tax on the mortgages that banks lend out.

    LOL
    狮子王 (formerly blackjack21trader): READ MY LIPS: NO MORE CRASH FOR 60 YEARS.

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    AsiaOne
    Monday, Sep 24, 2012
    SINGAPORE - More than half a billion dollars have been collected from the additional stamp duties imposed as part of property cooling measures.

    Out of these half a billion dollars, $450 million were collected from the additional buyer's stamp duty between Dec 8 last year and the end of last month.

    http://www.asiaone.com/A1Business/Pr...24-373515.html

    http://sg.finance.yahoo.com/news/sin...160000618.html

    Increased ABSD (Additional Buyer Stamp Duty)
    ABSD has increased by 5% to 7% across the board. A key difference is that Singaporeans pay ABSD as soon as their second property purchase. PRs pay ABSD as soon as their first property purchase.

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    If MAS asks bank to increase rate, that means they asking the bank to formal a cartel to rip borrowers off! How can that happen ?

    What happens to free market ?

    Anyway, I agree that slight increase is good for the market.

    If you have been to the showflats recently, the hotness is coming back way too fast for our market to grow steadily.

    People are starting to use all means to buy a property. Not a very good sign.

    But to increase interest rates to enrich the bank (so as to moderate property market - this idea is unplatable) at the expense of borrowers - No Way !

    One way to increase the rate is to increase deposit interest rates, but let the bank retain their spread (not increase!).

    Like that Office Boy can still pacify himself say left pocket right pocket.

    Haha!

    DKSG

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    they already increase rates from SIBOR +0.75% or 0.85% to know +0.95% over the past year. So it's already happened.

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    Quote Originally Posted by kane
    they already increase rates from SIBOR +0.75% or 0.85% to know +0.95% over the past year. So it's already happened.
    This kinda increase is free market movements, if Bank A increase and Bank B can undercut Bank A, then such increases are market driven.

    DKSG

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    Quote Originally Posted by Arcachon
    Why kill the golden goose, feed the golden goose more to lay more egg.

    The taxman collected about $110 million in additional buyer's stamp duty between Dec 8 last year - when ABSD took effect - and March 31 this year. The sum includes $66.2 million in ABSD from foreigners who bought 369 private homes over the near four-month period.

    http://www.asiaone.com/Business/My%2...13-339540.html

    Friday, Apr 13, 2012
    The Business Times
    The asset bubbles facing Hong Kong and Singapore is critical and both governments are not concern about the tax revenue lost but rather to tame the market and for the financial markets to be sustainable.

    You should not be worried about government's tax revenue. They can always get the needed revenues elsewhere.
    Last edited by Leeds; 23-03-13 at 17:58.

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    Quote Originally Posted by DKSG
    If MAS asks bank to increase rate, that means they asking the bank to formal a cartel to rip borrowers off! How can that happen ?

    What happens to free market ?

    Anyway, I agree that slight increase is good for the market. DKSG
    Is there such a thing as a free market in this real world? Not in economic sense.

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    Quote Originally Posted by DKSG

    If you have been to the showflats recently, the hotness is coming back way too fast for our market to grow steadily.

    People are starting to use all means to buy a property. Not a very good sign.

    DKSG
    What I noticed was that a lot of ppl worried that more cm are coming and make them more difficult to purchase, kind of the small reverse effect and fear of MTB....

    Another way to see, ppl are capable of buying more and also has the holding power, nn too easy to see panic selling in near term..

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    for the rich they can go anywhere, for middle class staying in hdb they exoect children go get BtOs later, for upper middle class stay in PC they cannot move easily overseas so worried abt children not being to maintain same quality of life so buy chop chop first

    Tax of 7 to 10pc acceptable as develops all give discount to offset
    Ride at your own risk !!!

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    To be frank, I do not see singapore as a bubble as we are a city rather than a country just like new York, London, etc. We are fortunate that we have public housing and if garment can regulate the public housing policy to moderate the pricing will be a good strategy. The prices of PCs should be similar to London, new York, Sydney, etc.
    Quote Originally Posted by Leeds
    The asset bubbles facing Hong Kong and Singapore is critical and both governments are not concern about the tax revenue lost but rather to tame the market and for the financial markets to be sustainable.

    You should not be worried about government's tax revenue. They can always get the needed revenues elsewhere.

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    Quote Originally Posted by phantom_opera
    for the rich they can go anywhere, for middle class staying in hdb they exoect children go get BtOs later, for upper middle class stay in PC they cannot move easily overseas so worried abt children not being to maintain same quality of life so buy chop chop first

    Tax of 7 to 10pc acceptable as develops all give discount to offset
    Developer may sell higher to give better discount , but buyer feel good..

    Today' kid are good life , but then is wise to keep inflation at bay...

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    A crash is needed.

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    Quote Originally Posted by yowetan
    A crash is needed.
    .........
    In the final analysis.....its NOT whether you have a diploma,degree,masters OR PHD....its whether you have a HDB/PC/EC or LANDED...

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