Homebuyers beware! Sweeteners offered by developers in Hong Kong can turn sour
Property developers are offering enticing mortgage deals, but buyers who take advantage of such deals may face making hefty monthly repayments after the initial honeymoon period is over
Buyers beware! Sweeteners, such as mortgage loans of up to 90 per cent of the value of new flats, may be hazardous to the long-term finances of homeowners, especially if local benchmark mortgage interest rates start to go up – as they are expected to – real estate experts warn.
They caution that such sweeteners come with high interest rates, similar to the subprime lending rates in the United States which triggered the 2008 global financial crisis. Subprime lending meant that virtually anyone could get financing for a home purchase – at a high interest rate.
Property developers have been enticing buyers by offering mortgage deals, in some cases up to 90 per cent of the value of the home, as an easy way to circumvent the Hong Kong Monetary Authority (HKMA)’s mortgage lending guidelines to banks. Some developers are also offering to pay the hefty government stamp duties.
The HKMA’s guidelines mean that, in most cases, banks can only offer up to 60 per cent of the value of the home.
Some developers are offering buyers a two-year mortgage holiday where they don’t have to repay the loan. Others are offering buyers very low interest rates for loan repayments for the first two years. Nonetheless, buyers then face having to repay the developers at a higher interest rate than mortgages offered by banks.
