HSBC and Standard Chartered are declining to extend new loans to buyers of property in two uncompleted Hong Kong residential projects, that is developed by China’s Evergrande Group. One of the brokers from the mortage told that Bank of East Asia had taken a similar step.
The move by the banks emerged after a Chinese court froze a $20 million bank deposit held by Evergrande and a Chinese city regulator briefly suspended sales from two of its projects. Three brokers said that the banks had halted lending to two residential projects in Hong Kong that were scheduled for completion in August and October. But they said that the banks were still lending for a third, completed Evergrande development. They also added that more banks may follow suit.
HSBC declined to comment while Standard Chartered did not respond to request for comment. Bank of East Asia said that approved applications will not be affected. Evergrande said other banks were still approving mortgages for its off-plan units. It said that it expected any decision by Hong Kong banks, which it did not name, to halt lending to have only a minor impact. And added that its developments were on schedule. Ivy Wong, managing director of Centaline Mortgage Broker, said that, from a bank’s perspective, a mortgage for pre-sold developments is a loan without the collateral of a completed property, so the risk is higher.
Mortgage brokers said that only a small number of buyers had been affected as many applications for the two uncompleted projects had previously been approved. They also said that the prospective buyers could also seek to change payment arrangements with Evergrande to make a purchase after completion.
Eric Tso, senior vice president of Mreferral, said that many buyers whose applications were rejected had initially sought to borrow directly from Evergrande. Tso said that now Evergrande’s not extending mortgages anymore. And also added that banks would typically not offer a mortgage with a loan-to-property value ratio of 90%. Evergrande did not comment on whether it was still offering mortgages.