Hong Kong’s monetary authority has relaxed the city’s decade-old lending curbs, granting more mortgage loans to homebuyers, rental property and offices, after high interest rates turned the city’s real estate bull run into a slump.

Starting immediately, homes valued at less than HK$30 million (US$3.83 million) will be entitled to 70 per cent mortgage financing, compared with the previous rule that granted only 60 per cent credit to flats valued at between HK$15 million and HK$30 million, according to the Hong Kong Monetary Authority (HKMA).

Residential property that are valued at more than HK$35 million, considered luxury homes in Hong Kong, will be entitled to 60 per cent mortgage, from 50 per cent previously, according to the HKMA.

For rental property that are not used by owners, the maximum loan-to-value ratio will be increased to 60 per cent, from 50 per cent. Extra leeway will also be given to offices, retail shops and industrial buildings, where their loan financing ratio will be lifted to 70 per cent, from 60 per cent.

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Hong Kong’s government has tightened the city’s mortgage and levy rules several times since 2009 to tamp down a housing bull run fuelled by the cheap funding unleashed by global central banks in the aftermath of the 2008 Global Financial Crisis. The measures included capping the loan-to-value ratio to compel buyers to put more money up front to deter speculators, and increasing the stamp duty on second homes.

The restrictions, combined with rising interest rates and the economic malaise over the pandemic period, stopped the bull run in its tracks, with median home prices plunging by about 21 per cent from its 2021 peak. Prices fell 7 per cent last year, dropping another 1.6 per cent last month.

Transactions of residential and non-residential property shrank by about 4.5 per cent last year, according to the HKMA’s data. Offices also suffered, with the average prices of commercial property falling by about 7 per cent last year, while 16 per cent more Grade A offices stood empty.

Those measures began to relax in July 2023, when the HKMA added 10 percentage points to the 60-per cent mortgage allowance for homes valued below HK$15 million to bolster Hong Kong’s post-pandemic economic growth.

The HKMA will also suspend a requirement for mortgage borrowers to undergo a stress test, which entailed assessing their ability to repay if interest rates were to rise by 2 percentage points from the prevailing level.

The HKMA said it would also roll back the financing caps for property development projects from 50 per cent of the expected value to the 60 per cent cap imposed in June 2017. In addition, the authority will lift the existing requirement for banks to set aside additional capital for exposure to the mortgage financing provided by developers.