Hong Kong property cooling moves set to fail as shadow lenders fill the gap
Hong Kong’s latest attempt at cooling home prices in one of the world’s most expensive property markets is expected to send buyers scouring for loans in the unregulated shadow banking industry, spreading risk across the financial sector.
Home prices in Hong Kong, where a nano-apartment of less than 200 square feet can cost as much as $500,000, have surged more than 137 percent since the financial crisis in 2008, propelled by a supply shortage, low interest rates, and big flows of money from mainland Chinese investors.
They now pose a huge challenge for the territory’s incoming leader, Carrie Lam. The cost of accommodation in the financial hub, where home ownership is a distant dream for many, was among the triggers for mass protests in late 2014.
Authorities have failed to rein in prices despite eight rounds of mortgage tightening by the Hong Kong Monetary Authority (HKMA) since 2009, on top of a series of tax and regulatory policies imposed by the government.
As those measures have curbed bank lending, finance companies have leapt into the gap. They funded 8.7 percent of mortgages for new apartments completed in 2016, according to Centaline Property Agency. For flats that have a completion date in 2017, the figure surges to 15.5 percent and is expected to rise further, it said.