Developers in Hong Kong such as China Vanke Co. Ltd.'s local arm and Cheung Kong Property Holdings Ltd. are offering mortgage loan options to homebuyers in a bid to boost sales in their respective projects in the city's Tsuen Wan area, the South China Morning Post reported.
The companies are offering financial assistance to homebuyers in light of stricter lending rules implemented by the Hong Kong Monetary Authority to cool property prices in the city.
According to the June 10 report, the Hong Kong-listed arm of China Vanke, Vanke Property (Overseas) Ltd., is redirecting HK$350 million of funds raised from a rights issuance in 2016 to provide mortgages to customers at its Pavilia Bay project, which is a 20/80 joint venture with New World Development Co. Ltd.
The report also noted that New World, being the majority owner of Pavilia Bay, would be required to inject HK$1.4 billion into the mortgage plan, taking the companies' total investments for mortgage loans to HK$1.75 billion.
Prudential Brokerage associate director Alvin Chi-wai Cheung told SCMP that Vanke's strategy is an indication that home prices have reached a dangerously high level if buyers need the assistance of developers in order to complete purchases.
Meanwhile, Cheung Kong is also offering loans that will cover up to 85% of the cost of each unit sold at its Ocean Pride project in Tsuen Wan. SCMP noted that Cheung Kong's loan is subjected, in the first three years, to an interest rate that is 2.25% below the prime lending rate, which sits at 5%.