8/11/2018-2

Chen Delin: I have not confirmed that the property market will not reduce the severity of the fire.

The trade war between China and the United States has not subsided, causing large fluctuations in the external market conditions, which has turned the atmosphere of Hong Kong’s property market down. The President of the HKMA, Chen Delin, said in the Legislative Council yesterday that although the trade war has not yet affected the real economy, the sentiment has been affected and the future will be affected. If the situation does not improve or even lasts for a long time, it will further dampen the desire of home buyers. However, it is meaningless to speculate on the development of trade war at this stage.

In order to manage the risks of the financial system, the HKMA has launched 8 rounds of counter-cyclical measures since 2009. Chen Delin said that although property prices have been adjusted, it still takes longer to observe whether the property market cycle is reversed. If the property market is confirmed to enter the down cycle, Relaxing counter-cyclical measures, but he stressed that it is too early to say.

Since August, the price of property has only dropped by 3%.

As the property market has signs of turning, the external financial bureau will relax the counter-cyclical measures to make it easier for the public to buy flats. Chen Delin pointed out that it is difficult to estimate whether the property market will turn around with short-term property prices. For example, the trading volume will fall from the June high to October. It is also higher than September, so it will not judge the short-term property market data.

Chen Delin also mentioned that the property market has undergone adjustment in October 2015. With reference to the Central Plains City Leading Index (CCL), property prices fell by 13% in six months. At that time, the HKMA was not a down cycle, so there was no relaxation of the reverse cycle. As a result, property prices have subsequently rebounded; the current property price adjustment has fallen by about 3% from August to the present and needs more time to observe.

He added that the HKMA will not set an observation time limit and will judge the overall consideration of property prices, trading volume, Hong Kong economic fundamentals, unemployment rate, wage rise and fall, and macroeconomic factors.

As regards the current risk of the property market, Mr Chan said that it is still at a manageable level. After a number of rounds of counter-cyclical measures, the income-to-income ratio of the mortgage burden of home buyers is only 34%, and nearly two-thirds of Hong Kong’s buildings have already been repaid. Clearing the mortgage, so there is a sufficient buffer to deal with the downside risk of the property market. If the unemployment rate rises and the wages continue to fall, the relevant ratio will be raised to 40%, which will increase the risk. However, based on the current market conditions, I believe that it will reappear in 1997. There is not much chance of a sudden jump in the emergence of “jumping goods" due to negative assets.

New disk high number of mortgage risk is limited

In recent years, in order to stimulate sales and provide high-value mortgages when selling new properties, the State Administration of Hong Kong, Mr. Yan Guoheng explained yesterday that the risk of high-margin mortgages is not high, and the total amount of loans is only about 2% of the amount approved by banks. The bureau has been collecting data from banks and other sources to strictly monitor the potential risks of the property market and mortgages.

Yan Guoheng also pointed out that counter-cyclical measures to manage mortgage business are indeed quite tight, but it is not unreasonable.

On the other hand, according to the documents submitted by the HKMA to the Legislative Council, as of the end of August, Hong Kong’s banking-specific classified loans (also known as non-performing loans) remained at a low level of 0.53%. Chen Delin reiterated that the floor-to-business ratio was lower. However, the current overheated property market and Hong Kong’s just entering the rate hike cycle will bring more risks.