Latest prudential measures for property mortgage loans

The new round of supervisory measures on property mortgage made by the Hong Kong Monetary Authority (“HKMA”) on 27 February and 2 March 2015 respectively. These measures include:

(1) The maximum loan-to-value (“LTV”) ratio for self-use residential properties with value below HK$7 million is lowered by a maximum of 10 percentage points. For example, the maximum LTV ratio applicable to properties with value at HK$6 million or below and subject to the LTV cap of 70% is lowered to 60%. 

(2) The maximum debt-servicing ratio (“DSR”) for borrowers who buy a second residential property for self-use is lowered to 40% from 50%, and the stressed-DSR cap is lowered to 50% from 60%. 

(3) The maximum DSR of mortgage loans for all non-self-use properties, including residential properties, commercial and industrial properties and car park spaces, is lowered to 40% from 50%, and the stressed-DSR cap is lowered to 50% from 60%.

The above three countercyclical measures have already come into effect. However, mortgage applications for properties with Provisional Agreement of Sale and Purchase (“PASP”) signed on or before 27 February 2015 will not be affected.

(4) Starting from 2 March 2015, where mortgage applicants seek Additional Financing (through either co-financing or mortgage insurance schemes) that results in total mortgage finance amounting to more than 20 percentage points over the normal permissible LTV ceilings, Authorized Institutions should apply a 5-percentage-point knock down on the applicable DSR caps. For example, for properties with a maximum permissible LTV of 60%, the normal DSR cap is 50% and a stressed-DSR cap is 60%. However, if the mortgage applicants seek Additional Financing to bring the total LTV to above 80%, then the applicable DSR cap will need to be reduced to 45% and the stressed DSR cap to 55%.

Besides, The Hong Kong Mortgage Corporation Limited (“HKMC”) also announced on 27 February 2015 that revisions will be made to the Mortgage Insurance Programme (“MIP”) so that the maximum MIP cover for eligible properties would be reduced from 90% LTV ratio to 80% LTV ratio, except for those first time homebuyers with regular salary and stronger repayment ability. However, homebuyers who have executed the PASP on or before 27 February 2015 will not be affected.

All of the aforementioned measures have taken effect already. The EAA would like to remind licensees to be fully conversant with the new measures, so as to be able to advise their clients in a responsible manner and to refrain from making any misrepresentation.

Licensees may refer to the websites of HKMA (www.hkma.gov.hk) and HKMC (www.hkmc.com.hk) for more details of the new measures.

Revisions of Mortgage Insurance Programme

The Hong Kong Mortgage Corporation Limited (HKMC) today (February 22) announced that revisions will be made to the eligibility criteria for the Mortgage Insurance Programme (MIP). 

Currently, properties with value at or below HK$6 million are eligible for the maximum MIP cover of 90% loan-to-value (LTV).

After the revisions, only mortgage loans of properties with value at or below HK$4 million will be eligible for the maximum MIP cover of 90% LTV.

Properties with value above HK$4 million and below HK$4.5 million will be eligible for MIP cover up to HK$3.6 million, being 80% to 90% LTV, while properties with value at or above HK$4.5 million will only be eligible for the maximum MIP cover of 80% LTV.  The cap on the value of properties under MIP will remain unchanged at HK$6 million.  

The revisions will apply to MIP applications with provisional sale and purchase agreement signed on or after February 23, 2013.  For homebuyers who have executed the provisional sale and purchase agreement on or before February 22, 2013, their mortgage loan applications may be submitted by the MIP participating banks for processing in accordance with the existing scope and criteria of the MIP.

The Chief Executive Officer of the HKMC, Mr Raymond Li, said, "Taking into account the current market conditions, these revisions aim to ensure that the HKMC is taking a prudential approach to risk management on its exposure to high LTV mortgage lending."

For enquiries, please call the MIP Hotline (Tel: 2536 0136).

Ends/Friday, February 22, 2013

 

Re: Special Stamp Duty and Buyer’s Stamp Duty

The EAA is writing to draw your attention to the announcement made by the Government on 26 October 2012 to introduce measures to address the overheated property market.


The Government has decided to amend the Stamp Duty Ordinance (SDO) to adjust the rates and extend the coverage period in respect of the existing Special Stamp Duty (SSD), and introduce a new Buyer’s Stamp Duty (BSD) on residential properties acquired by any person except a Hong Kong Permanent Resident (HKPR).

SSD

The adjusted SSD rates and period of coverage of the SSD are as follows:

Date of Disposal SSD rates for properties acquired between 20 November 2010 and 26 October 2012 Proposed SSD rates for properties acquired on or after 27 October 2012
Within a period 6 months 15% 20%
After a period of 6 months but within a period of 12 months 10% 15%
After a period of 12 months but within a period of 24 months 5% 10%
After a period of 24 months but within a period of 36 months -- 10%


BSD

The BSD will be charged at a flat rate of 15% of the stated consideration for the transactions or market value of all residential property transactions, whichever is higher, on top of the existing ad valorem stamp duty and SSD, if applicable, acquired by any person or entity, except a HKPR.

The above measures are applicable to all residential properties acquired on or after 27 October 2012.


Pending the enactment of the legislative amendments to the SDO, licensees are advised to bring to the attention of their clients before entering into any agreement for sale and purchase of a residential property, where applicable, of the adjusted SSD rates and payment of the BSD. Licensees should also invite their clients to seek legal advice on their liability for payment of SSD and / or BSD, if necessary, before proceeding with the execution of the agreement for sale and purchase.

To enhance the understanding of the estate agency trade on the Government’s new measure, the EAA has arranged the Inland Revenue Department (IRD) to brief the representatives of the estate agency associations shortly on the details of the SSD and BSD.

The EAA will pay close attention to the enactment of the legislative amendments to the SDO. Upon the passage of the legislative amendments, the EAA may issue new guidelines or practice circular to the trade if necessary. Meanwhile, licensees are strongly advised to refer to the FAQs for the SSD and BSD available at the website of the IRD at www.ird.gov.hk/eng/faq/ssd.htm and www.ird.gov.hk/eng/faq/bsd.htm respectively, for more details.

 

computation of BSD
Example 1

Mr. Chan, a non Hong Kong Permanent Resident, signed a provisional agreement for sale to acquire a residential property on 1 November 2012 at the purchase price of $3M.  The formal agreement for sale was signed on 15 November 2012.   Will Mr. Chan be liable to pay BSD?

Since the residential property was acquired by Mr. Chan on or after 27 October 2012, he has to pay BSD for the transaction and the BSD payable is $450,000 ($3M x 15%).


Example 2

If Mr. Chan signed a provisional agreement for sale to acquire a residential property on 15 October 2012 but the formal agreement for sale was signed on 15 November 2012.   Will Mr. Chan be liable to pay BSD?

Since the residential property was acquired by Mr. Chan before 27 October 2012, the transaction is not chargeable with BSD.


Example 3

Mr. Lee, a Hong Kong permanent resident (HKPR), and his spouse Ms. Cheung jointly purchased a residential property on 1 November 2012 at the purchase price of $4M.  Ms. Cheung is not a HKPR.  Whether the transaction is chargeable with BSD?

Acquisition of residential properties by close relatives (i.e. spouse, parents, children, brothers and sisters) jointly if one of them is a HKPR is not chargeable with BSD.  Mr. Lee and Ms. Cheung are not required to pay BSD for the transaction.

Example 4

Mr. Wong and Mr. Ho jointly purchased a residential property on 1 November 2012 at the purchase price of $4M.  Mr. Wong is a HKPR whereas Mr. Ho is not.  They are not close relatives (i.e. spouse, parents, children, brothers and sisters) .  What is the amount of BSD payable?

If a residential property is jointly acquired by a HKPR and a non HKPR, who is not a close relative of the HKPR, as joint tenants or tenants-in-common, the BSD rate will apply on the stated consideration or full value of the property, whichever is the higher, regardless of the share of the non HKPR in the acquisition of the property.   In the above situation, the amount of BSD payable is $600,000 (i.e. 4M x 15%).


Example 5

Mr. Lee, entered into a provisional agreement for sale and purchase on 1 November 2012 to acquire a residential property at the purchase price of $5M.  On 30 November 2012, Ms. Cheung's name was added in the formal agreement for sale and purchase as one of the joint tenants.  Ms. Cheung is neither a HKPR nor the close relative of Mr. Lee.  Will Mr. Lee and Ms. Cheung be liable to pay BSD?  What is the amount of BSD payable?

In the above situation, Ms Cheung has acquired part of the property from Mr. Lee.  As Ms. Cheung is not the close relative of Mr. Lee, there will not be exemption from BSD.  They are liable to pay BSD on the full amount of the consideration or the value of the property, whichever is the higher.  The amount of BSD payable is $750,000 (i.e. 5M x 15%).


Example 6

Mr. Lee, entered into an agreement for sale and purchase on 1 November 2012 to acquire a residential property at the purchase price of $5M.  On 30 November 2012, Ms. Cheung's name was added in the assignment as one of the joint tenants.  Ms. Cheung is neither a HKPR nor the close relative of Mr. Lee.  Will Mr. Lee and Ms. Cheung be liable to pay BSD?  What is the amount of BSD payable?

In the above situation, Ms Cheung has acquired part of the property from Mr. Lee.  As Ms. Cheung is not the close relative of Mr. Lee, there will not be exemption from BSD.  They are liable to pay BSD on the full amount of the consideration or the value of the property, whichever is the higher.  The amount of BSD payable is $750,000 (i.e. 5M x 15%)


computation of SSD
Example 1 (Residential property is acquired before 20 November 2010)

Mr. Chiu signed a provisional agreement for sale to acquire a residential property on 15 September 2010. Subsequently, he signed a provisional agreement for sale to dispose of the property on 20 December 2010. Any SSD liability when Mr. Chiu disposed of the property?

As Mr. Chiu acquired the subject property before 20 November 2010 (the effective date of SSD), no SSD is payable when he signed the provisional agreement for sale to dispose of the property on 20 December 2010.

Example 2 (Residential property is acquired between 20 November 2010 and 26 October 2012 and disposed of / transferred after 24 months from the date of acquisition)

Mr. Chan acquired a residential property on 22 March 2011 and disposed of it on 30 November 2013. Any SSD liability when Mr. Chan disposed of the property?

No SSD is payable because the subject property was acquired before 27 October 2012 and is disposed of/transferred after 24 months from the date of acquisition.

Example 3 ( Property was acquired between 20 November 2010 and 26 October 2012 and the holding period is 6 months or less)

Mr. Ho acquired a residential property on 10 September 2011 and disposed of it for $6.5M on 9 March 2012. How to calculate the holding period of the property? What is the rate of SSD? What is the amount of SSD payable?

For the purposes of SSD, the property holding period is calculated based on the calendar months, i.e. the period from a certain day in a month to the preceding day in the following calendar month is counted as 1 month. In the above example, Mr. Ho has held the property for exactly 6 months. The applicable rate of SSD is therefore 15%. The amount of SSD payable is $975,000, i.e. 15% of $6.5M.

Example 4 (Property was acquired between 20 November 2010 and 26 October 2012 and the holding period is more than 6 months but not more than 12 months)

Mr. Ho acquired a residential property on 10 September 2011 and disposed of it for $6.5M on 10 March 2012. How to calculate the holding period of the property? What is the rate of SSD? What is the amount of SSD payable?

Mr. Ho disposed of the subject property on 10 March 2012. He has held the property for more than 6 months but not more than 12 months. The applicable rate of SSD is 10%. The amount of SSD payable is $650,000, i.e. 10% of $6.5M.

Example 5 (Property was acquired between 20 November 2010 and 26 October 2012 and the holding period is more than 12 months but not more than 24 months)

Mr. Wong acquired a residential property on 2 February 2011 and disposed of it for $1.8M on 18 August 2012. How to calculate the holding period of the property? What is the rate of SSD? What is the amount of SSD payable?

The subject property was acquired after 19 November 2010 and disposed of for more than 12 months but within 24 months from the date of acquisition. The applicable SSD rate is 5%. The amount of SSD payable is $90,000, i.e. 5% of $1.8M.

Example 6 (Property was acquired on or after 27 October 2012 and the holding period is within 6 months)

Mr Wong acquired a residential property on 1 November 2012 and disposal of it for $3M on 1 January 2013. How to calculate the holding period of the property? What is the rate of SSD? What is the amount of SSD payable?

The subject property was acquired after 26 October 2012 and disposal of within 6 months from the date of acquisition.  The applicable SSD rate is 20%.  The amount of SSD payable is 600,000, i.e. 20% of $3M.


Example 7 (Property was acquired on or after 27 October 2012 and the holding period is more than 6 months but not more than 12 months)

Mr Wong acquired a residential property on 1 November 2012 and disposal of it for $3M on 15 September 2013. How to calculate the holding period of the property? What is the rate of SSD? What is the amount of SSD payable?

The subject property was acquired after 26 October 2012 and disposal of for more than 6 months but within 12 months from the date of acquisition. The applicable SSD rate is 15%.  The amount of SSD payable is $450,000, i.e. 15% of $3M.

Example 8 (Property was acquired on or after 27 October 2012 and the holding period is more than 24 months but not more than 36 months)

Mr Wong acquired a residential property on 1 November 2012 and disposal of it for $4M on 15 December 2014. How to calculate the holding period of the property? What is the rate of SSD? What is the amount of SSD payable?

The subject property was acquired after 26 October 2012 and disposal of for more than 12 months but within 36 months from the date of acquisition. The applicable SSD rate is 10%. The amount of SSD payable is $400,000, i.e. 10% of 4M.

Example 9 (Property was acquired between 20 November 2010 and 26 October 2012 and holding period is more than 24 months but not more than 36 months)

Same as Example 8 but the property was acquired by Mr Wong on 15 October 2012 and disposal of it for $4M on 15 December 2014. How to calculate the holding period of the property? What is the rate of SSD? What is the amount of SSD payable?

Since the subject property was acquired before 27 October 2012 and disposal of for more than 24 months from the date of acquisition, no SSD is payable.

On 22 February 2013, the Financial Secretary announced that the Government would amend the Stamp Duty Ordinance to adjust the ad valorem stamp duty (AVD) rates. The new AVD rates are as follows.

(Where the stamp duty calculated includes a fraction of $1, round-up the duty to the nearest $1.)

     
Stamp Duty Rates On Sale or Transfer of Immovable Property in Hong Kong (2nd Property or Above)
Amount or value of the consideration
Rate
5/11 New Rate
Exceed Does Not Exceed  
15%

 

$2,000,000

1.5%

$2,000,000

$2,176,470

$30,000+20% of excess over $2,000,000

$2,176,470

$3,000,000

3%

$3,000,000

$3,290,330

$90,000+20% of excess over $3,000,000

$3,290,330

$4,000,000

4.5%

$4,000,000

$4,428,580

$180,000+20% of excess over $4,000,000

$4,428,580

$6,000,000

6%

$6,000,000

$6,720,000

$360,000+20% of excess over $6,000,000

$6,720,000

$20,000,000

7.5%

$20,000,000

$21,739,130

$1,500,000+20% of excess over $20,000,000

$21,739,130

 

8.5%


Stamp Duty Rates On Sale or Transfer of Immovable Property in Hong Kong (1st Property)
Amount or value of the consideration
Rate
Exceed Does Not Exceed  

 

$2,000,000

$100

$2,000,000

$2,351,760

$100 + 10% of excess over $2,000,000

$2,351,760

$3,000,000

1.5%

$3,000,000

$3,290,320

$45,000+10% of excess over $3,000,000

$3,290,320

$4,000,000

2.25%

$4,000,000

$4,428,570

$90,000+10% of excess over $4,000,000

$4,428,570

$6,000,000

3%

$6,000,000

$6,720,000

$180,000+10% of excess over $6,000,000

$6,720,000

$20,000,000

3.75%

$20,000,000

$21,739,120

$750,000 + 10% of excess over $20,000,000

$21,739,120

 

4.25%


Stamp Duty Rates On Lease of Immovable Property in Hong Kong

Term

Rate
Not defined or is uncertain 0.25% x of the yearly or average yearly rent
Does not exceed 1 Year 0.25% x of the total rent payable over the term of the lease
Exceeds 1 Year & Does not exceed 3 Year 0.5% x of the yearly or average yearly rent
Exceeds 3 Years 1% x of the yearly or average yearly rent
Length of Delay Penalty

not exceeding 1 month

double the amount of stamp duty

exceeding 1 month but not exceeding 2 months 4 times the amount of stamp duty
in any other case 10 times the amount of stamp duty

 

免責聲明:以上資訊只供參考,其準確性不被保證。一切請根據金管局及政府之指引作準。