{I-bank focus}Macquarie deems LTV relaxation dangerous

    The HK Chief Executive Carrie Lam's Policy Address included the residential mortgage down-payment requirement is lowered to 10% on properties valued at <HK$8m (up from HK$4m previously).
  Macquarie Research said Lam's intention to help first-time buyers purchase their first home seriously counters the cooling measures launched throughout the last decade. It was in October, 10 years ago, that HKMA first tightened the LTV (loan-to-value) requirement for >HK$20m properties from 70% to 60%. Subsequently, LTV dropped further to 20-50%, tightening spread to properties <HK$10m.
  The research house said property prices have risen 160% since 2009 and the harsh LTV requirement was criticized as it shut first-time buyers out from the market. However, that does not mean doing the opposite can cool the market or help first-time buyers.
  Macquarie believes it will re-heat the market, which had merely dropped 5% since June. Lowering down payments may make some properties more "accessible" to the middle-income class, but it does not make them more affordable.
  Macquarie believes this is a dangerous move in view of the economy slowing down as well as uncertainty about interest rate trends over the next 12 months.
  It said that multiple-home owners can now also enjoy a 20% down payment for properties between HK$6m and HK$10m versus <HK$6m previously.