Buyers from Hong Kong are expected to recharge demand for homes in the Greater Bay Area as cheaper loans and seamless cross-border remittances added to the appeal of working and living in the region.
Industrial and Commercial Bank of China (Asia), the local unit of China’s biggest lender by assets, said demand from local buyers for mortgage financing of Bay area homes surged last quarter as the economies in mainland and Hong Kong showed signs of recovery following forecasts for annual growth in 2021.
“The number of [mortgage] applications in the first quarter of 2021 reached 40 per cent of the entire year of last year,” Flora Leung, head of retail banking and wealth management department, said at a briefing on Tuesday. “A large number of Hong Kong people work and live in cities in the region, which has increased the demand for loans for property purchases in recent years.”
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The bank saw a tenfold increase in such applications in 2020 over 2019, Leung added. Zhuhai and Zhongshan were the favourite picks of Hongkongers, who accounted for 85 per cent of the applications.
Home transactions in the Greater Bay Area involving Hongkongers sank 46 per cent to 161,000 in 2020 due to the stringent border restrictions amid the Covid-19 pandemic, according to Centaline Property Agency. That should rebound by about 25 per cent to more than 200,000 this year as vaccination programmes expand and travel curbs eased.
The Greater Bay Area covers Hong Kong, Macau and nine cities in southern Guangdong province. Relatively lower house prices in mainland cities and improved cross-border transport links such as the Hong Kong-Zhuhai-Macau Bridge and Hong Kong-Shenzhen express rail have cut travelling time and raised the appeal of home ownership there.
House prices in the Greater Bay Area are expected to continue to trend upwards, with five cities marking a record high in March, according to Centaline. Shenzhen, one of the five, has broken price records for 19 straight months, it added.
ICBC (Asia) offers mortgages which allow Hong Kong buyers the option to pay the down payment and monthly instalments using the local dollar without the need to visit mainland branches, sidestepping the hassle of cross-border remittances and foreign-exchange fluctuations.
The down payment could be transferred through the bank to the applicant’s yuan-denominated account in mainland China under the same name, which can be disbursed to the home developers thereafter.
Without this arrangement, homebuyers would have to open a mainland bank account, take a mortgage from a mainland lender and remit the house payments from Hong Kong, subject to daily transfer limits.
Leung said the ICBC (Asia)’s plan caps the loan size at HK$10 million at 3.25 per cent per annum with a maximum loan-to-value ratio of 60 per cent and repayment terms of up to 30 years. Other mainland lenders in Hong Kong, such as China Citic Bank, Bank of China, and China Construction Bank, are also offering similar loan facility.
“The interest rate is much lower compared to the 5 to 6 per cent range offered by other banks in mainland China,” said Kostka Cheung, chief operating officer at mReferral Mortgage Brokerage Services. “This is the lowest interest rate available in the market.”
Based on these terms, a flat costing HK$5 million would require a monthly repayment of HK$13,056, according to mReferral.
For HK$5 million, one could buy a flat measuring 1,141 sq ft (106 sq m) in gross floor area with three rooms in Shenzhen’s northeastern Longgang district, according to listings from Centaline. The sum would only buy a 354-sq ft flat at Kweilin House, a 41-year old development in Tsuen Wan Centre.
Midland China expects around 70 per cent of its customers who purchase mainland properties would opt for applying for a mortgage instead of paying in full, up from about 50 per cent, as local banks start offering mortgages on mainland properties to Hong Kong investors.
“Given the convenience and lower interest rates, I believe that more buyers would opt to take the mortgage from a local bank” without having to bear the currency risk, said Anita Wong, Hong Kong-based assistant general manager for Greater Bay Area sales and marketing at Midland.
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