Are Hong Kong banks quietly fuelling the decline of our older residential neighbourhoods?
By HK Lawyer AJ Halkes Barrister-at-Law
When homeowners downsize or sell, they often accept lower prices, wanting to move quickly. The same applies to those upgrading.
But banks often benchmark entire buildings against isolated low transactions, dragging down valuations for an area. This reduces borrowing power for potential buyers, pushes prices down further, creating a vicious cycle. The decline in demand and the reduced ability to buy is being driven by the banks themselves.
Meanwhile, new developments benefit from high loan-to-value ratios and generous valuations, keeping prices for them inflated and entry difficult for first-time buyers.
Eager buyers can’t get on the ladder due to low valuations or high prices, and existing homeowners face the same financing roadblocks. They can’t sell at a price that buyers can actually finance.
The banking sector’s approach to Hong Kong’s secondary property market seems tilted only toward new projects. By prioritising loans on fresh developments, banks push older districts into further decline instead of supporting urban regeneration.
Eventually, these ageing neighbourhoods fall into developers’ hands. Banks, of course, then finance their redevelopment into high-rise towers with little character.
Loan terms for older blocks have been cut sharply, sometimes now to just a few years. Even well-maintained older properties with good layouts are made out of reach for professionals with solid incomes.
Take a typical walk-up in Happy Valley. It should be a decent prospect, yet low valuations and short loan periods (tied to building age) make it nearly impossible to buy except for cash. The system the banks run does seem to operate to deliver older properties straight to developers, ensuring yet more urban decay.
Imagine if younger people could buy these older homes, renovate them, and bring new energy into these neighbourhoods. It would create vibrant communities with homeownership more attainable.
If the government encouraged banks to restructure financing for older buildings, it might disrupt the relationship between banks and developers. But the benefits would be huge: via more accessible housing, revitalised local economies, thriving ground-floor retail, and stronger community connections.
We could breathe life back into Hong Kong’s older districts, reduce urban decay, and make our city more dynamic and liveable.
Isn’t that the kind of long-term vision and community regeneration our banking sector should be proud to support?
If you need specific input regarding a strategic Hong Kong challenge or related legal matters in the HKSAR you can always DM me and check out my profile at https://www.ajhalkes.com
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