This undated photo shows the building of the Hong Kong Monetary Authority. (PHOTO / CHINA DAILY)

The Hong Kong Monetary Authority has relaxed the countercyclical macroprudential measures for residential properties for the first time since they were implemented in 2009, as authorities seek to protect Hong Kong’s financial system from the effects of sinking local home prices.

The HKMA announced it will adjust the maximum loan-to-value ratios for residential properties for self-occupation, to 70 percent for properties valued at HK$15 million ($1.92 million) or less; and 60 percent for properties valued at more than HK$15 million up to HK$30 million. For properties valued at above HK$30 million, the LTV ratio remain unchanged at 50 percent.

The HKMA is worried that as major economies continue to face high inflationary pressures, interest rates may remain elevated for some time

After the adjustments, homebuyers will be able to take out property mortgage loans at higher LYV ratios, which could ease their financial burdens.

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“We believe even after the introduction of the revised measures, the Hong Kong banking system still has sufficient buffers to deal with the challenge of a sharp adjustment in property prices. We think there is room for adjusting the measures,” HKMA Chief Executive Eddie Yue Wai-man said at a news conference on Friday.

Yue reminded the public that buying a home is a major decision in life, so prospective buyers must prudently manage financial risks, including property-market and interest-rate risks.

Following the COVID-19 pandemic and with interest rates rising, there has been a correction in residential property prices since last year. Despite a rebound early this year, market data showed that at the end of June, residential property prices were down 13 percent from their peak in 2021, HKMA said.

The HKMA is worried that as major economies continue to face high inflationary pressures, interest rates may remain elevated for some time. Any slowdown in the global economy due to high interest rates would inevitably affect the local economy.

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The HKMA implemented countercyclical macroprudential measures for property mortgage loans in 2009 to prevent swings in residential property prices that would affect the city’s banking system. The HKMA has been assessing conditions in the property market by monitoring factors such as property prices and transaction volumes, and the local and external economic environment, to determine whether adjustments to the measures are needed.