HKMA Eases LTV Rule for Commercial Real Estate Loans

Source: Regulation Asia Editors, Regulation Asia 2020-08-20

Effective from 20 August, the loan-to-value ratio cap is being raised from 40 to 50 percent. The 40 percent cap was introduced in 2009 as a market cooling measure.

The HKMA (Hong Kong Monetary Authority) has relaxed its rules for commercial real estate loans, seeking to ease pressure on businesses impacted by the Covid-19 pandemic.

“With the pandemic and escalating geopolitical tensions continuing to weigh on business confidence, non-residential property markets are likely to remain under pressure,” said HKMA chief Eddie Yue. “The HKMA considers it appropriate to adjust the countercyclical macroprudential measures on non-residential properties.”

In 2009, the HKMA introduced a 40 percent loan-to-value ratio cap for commercial properties in a bid to cool a booming property market. The cap is now being raised to 50 percent, applicable only to transactions where the provisional sale and purchase agreement is signed on or after Thursday (20 August).

The new loan-to-value cap is intended to only apply to mortgage loans obtained to finance property transactions or to refinance existing properties. It is not intended to apply to credit facilities that are secured by properties to finance business operations.

The HKMA circular is available here.

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HKMA Eases LTV Rule for Commercial Real Estate Loans

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