New mortgage loan scheme for rehabilitated buildings
Seven Hong Kong banks have joined hands with the Urban Renewal
Authority (URA) in a new initiative to provide better mortgage
services to owners of rehabilitated residential old
buildings.
At a press conference today (Friday), the Managing Director of the
URA, Mr Billy Lam, described this as an important measure to
motivate owners of old buildings in rehabilitation by improving the
liquidity potential of their flats.
Participating in the initiative are the Bank of East Asia, HSBC,
Liu Chong Hing Bank, Nanyang Commercial Bank, Standard Chartered
Bank, Wing Hang Bank and Wing Lung Bank. Mr. Lam said he believed
that more banks would join in later.
The banks will offer mortgage loans up to 70% of the property value
at an interest rate of 2% less than the premium rate or better.
More importantly, the repayment period and building age together
will be extended to 50 or 55 years, which means that borrowers will
enjoy a longer repayment period, depending on the age of the
building.
"In the past, banks in Hong Kong generally have given relatively
less weight to the mortgage market of old and poorly managed
buildings mainly because these buildings are prone to dilapidation
and therefore financially less secure as mortgage collateral. As a
result, the mortgage loan term has been mostly capped below 50
percent of the market value of the property concerned with a
shorter repayment period and a higher mortgage rate. This makes it
more difficult for an owner to market his flat, which in turn
frustrates any incentive to maintain his flat and building
properly. This is a vicious cycle which the URA now hopes to
reverse into a virtuous one."
In May this year, the URA announced a rehabilitation aid scheme
with a total budget of $210 million to assist owners in carrying
out rehabilitation work voluntarily to improve their buildings. As
a follow-up measure, the URA has been liaising with the banking
sector to help bring the old buildings market to a more active
life.
The URA has invited representatives of the banks to visit on site
several residential buildings which have been rehabilitated with
the assistance of the URA two months ago. They were impressed with
the outcome of the rehabilitation works and after further
deliberations, the banks have agreed to re-assess the potential of
the rehabilitated buildings for mortgage services.
"In this connection, the banks have also taken note of the fact
that the Government is considering various measures to promote a
stronger culture of building care," Mr Lam said.
Meantime, the URA has recently conducted an opinion survey among
some 200 owners and tenants in eight rehabilitated buildings to
gauge their needs on home mortgage services.
The findings showed that on average, every one in four tenants
interviewed is interested in obtaining a mortgage loan to purchase
a flat in his rehabilitated building. Among the owners, 80 per cent
are of the view that the value of their flats would go up after
rehabilitation and most would expect a rise of 10 to 20 per
cent.
Over 60 per cent of the owners are interested in taking out a bank
mortgage loan provided that the terms are sufficiently attractive,
such as a lower interest rate, a longer repayment period and an
increase in mortgage quantum.
Mr Lam commented that the market potential of rehabilitated
buildings was quite substantial: "In the next five years, the URA
alone will provide assistance to owners of some 32,400 units in 540
buildings to carry out rehabilitation works. There are of course
many other residential buildings for which the owners would
initiate rehabilitation work on their own without the URA's
assistance."
The URA has also arranged several briefings and site visits for
valuation firms and estate agents and encouraged them to join hands
with the banks in promoting the mortgage market for rehabilitated
buildings.
Commenting on the urban decay problem as a whole, Mr. Lam cautioned
that there was no room for complacency. "There are about 11,000
residential buildings or roughly 30 per cent of the total in Hong
Kong, which do not have owners' corporations or any form of
management. This makes it almost impossible for rehabilitation work
to take place in such buildings."
He said the URA's experience was that the existence of owners'
corporations was indispensable for getting a rehabilitation project
off the ground as well as maintaining a rehabilitated building in
the long run. "The owners of these buildings must help themselves
before we can help them," Mr. Lam said.