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Asia-Pacific | Equities

Hong Kong government measures to boost home ownership

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  • Hong Kong (HK) Chief Executive Carrie Lam announced a series of measures at her third policy address last week to address the public grievances over the lack of affordable housing. Lam did not mention any political reform but has emphasized improving the living condition of low-income families, boosting home ownership and increasing land supply as attempts to solve the city’s housing problem. There are also numerous initiatives to assist low income households, improve welfare, promote innovation and develop talent.

 

  • Latest policies are likely to increase more home ownership opportunities for government-owned housing estates and private residential properties below HK$10mln. However, Citi analysts think it may not have any major impact on short-term new private housing supply.

 

  • Citi analysts feel the high housing prices in Hong Kong may stay given the low interest rate environment. The price of smaller apartments may rise as a result of the new mortgage policy. For a property eligible for a mortgage loan of maximum cover of 80% LTV ratio, the cap of its value is to be raised from HK$6mln to HK$10mln.

 

  • While Citi analysts believe it is a right direction for the HK government to increase land supply as a long-term solution to alleviate public grievances on high housing prices, it remains dependent on lawmakers‘ execution to approve the government funding and may take at least 7 years from land resumption to completion.

 

  • Post-policy address, HK property sector rallied on hopes that home prices could stay at current high levels. Citi analysts like property developer stocks for their deep discounts to net asset value (NAV) and relatively high dividend yield.

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