How Hong Kong’s most expensive home was financed
Despite policies that the government and Hong Kong Monetary Authority set up to stabilize the city's heated property market, there are still ways for speculators to bypass them
Despite policies that the government and Hong Kong Monetary Authority launched in a bid to stabilize the city’s heated property market, there are still ways for speculators to bypass them.
Registering an apartment in a local citizen’s name to avoid the hefty stamp duty or borrowing money from financial institutions, instead of banks, are not uncommon in Hong Kong.
More details emerged as to the HK$1.08 billion (US$138 million) home purchase last year of House No 1 at 8 Mount Nicholson Road. The property is part of the luxury Mount Nicholson estate jointly developed by Wheelock Properties and Nan Fung Holdings at The Peak.
The transaction broke a record for a single new home in Hong Kong equivalent to HK$108,543 per square foot and marked the first time a house was bought at a 10-digit figure. House No 1 is close to 10,000 square feet, with a private garden and swimming pool.
Earlier it was reported that a certain Tung Chung public estate resident named Chau Yau-keung was the buyer on paper, but mortgage documents disclosed by the Land Registry showed that the guarantor was in fact mainland tycoon Xu Ning.
Xu bought a house at Jardine’s Lookout in 2011 for HK$500 million, but transferred it to corporate ownership for HK$600 million the next year.
The mainland tycoon, via his offshore company Giant Victory Holdings Limited, bought the pricey home at Mount Nicholson a month after the government raised its stamp duty to 15% from a range of 4.25% to 8.5% last November. The stamp duty reported came to HK$320 million.
Apparently Xu also paid higher than usual mortgage costs. The Hong Kong Economic Times reported that Xu asked Grand Harbour Finance for a HK$600 million loan, or about 55.5% of the total transaction amount.
The Monetary Authority guideline to banks is that buyers can borrow no more than 50% for a home purchase in excess of HK$10 million.
Assuming an annual mortgage rate of 9%, the average at a finance company compared to 2.1% banks usually offer, the paper estimated that Xu would have to pay annual interest of HK$54 million, with monthly instalments of HK$4.5 million.
Paying higher interest to a finance company provides flexibility for gaining approval for a loan, and makes it easier to transfer funds out of mainland China, especially amid tougher restrictions on banks vetting clients to prevent money laundering.
Completion of the transaction will see Xu join a group of emerging mainland tycoon tenants at Mount Nicholson. This elite club includes the likes of Midea founder Ho Heung-kin’s son Hi Kim-fung, Times Property chairman Shum Chiu-hung’s wife Li Yiping, Centralcon Group Wong Kwong-miu and Eternal Asia Supply Chain’s Chow Kwok-fai.
Each of them paid between HK$780 million and HK$890 million for a property in the exclusive and luxury development at The Peak.