2024 Policy Address: LTV ratio relaxation won’t reverse downward trend in housing prices

The government adjusted the maximum mortgage LTV ratio for residential properties to 70%.

The move to relax mortgage Loan-to-Value (LTV) ratios will bode well, particularly for residential projects. However, the measure is not strong enough to reverse the downward trend in housing prices, according to an expert.

"The future trend of Hong Kong housing prices will largely depend on the effectiveness of economic stimulus measures introduced by the mainland government," said Joseph Tsang, Chairman of JLL in Hong Kong.

Hannah Jeong, Head of Valuation & Advisory Services at CBRE Hong Kong, believes the relaxation will at least "stabilise the residential prices as more home buyers can enter the market."

"Given the further rate cut expectations and attractive incentives offered by developers, home buyers will be keen to explore home upgrading opportunities," Jeong added.

Overall, the relaxation of the LTV ratios is still a welcome move, said Tsang. In the 2024 Policy Address, Chief Executive John Lee announced that the government would adjust the maximum mortgage LTV ratio for residential properties to 70%, with the ratio capped at 50%.

"This will benefit investors and buyers purchasing a second home the most. It also increases buyers’ purchasing power despite stagnant wage growth," Tsang added.

The government also made similar adjustments to the maximum LTV ratio and the maximum debt servicing ratio for non-residential properties.

Dorothy Chow, Head of Valuation & Advisory Services at Colliers, said the further relaxation of the LTV ratio, coupled with the onset of an interest rate reduction cycle, will provide "greater liquidity for end-users and investors alike, thereby driving transaction volumes for higher-value properties and contributing to the overall recovery of the market."

Marcos Chan, Head of Research at CBRE Hong Kong, shared a similar sentiment, saying the measure will "gradually translate into investment demand."

"Together with the expected interest rate decline, overall property demand is expected to improve," Chan concluded.