Spike in some HK flat sales raises suspicions about mortgage fraud

HONG KONG • A jump in the number of Hong Kong flats selling for exactly HK$10 million (S$1.8 million) in recent months has raised suspicions about potential fraud, following a relaxation of mortgage rules for properties sold at that price.

Regulators loosened rules in October, allowing buyers to borrow up to 80 per cent on properties worth HK$10 million or less, versus HK$6 million previously, but still only enough for small to medium-sized flats in one of the world’s most expensive markets. For properties priced above HK$10 million, a 50 per cent down payment is required.

Data from realtor Ricacorp shows the number of home transactions priced at exactly HK$10 million rose in March and last month to 61 and 70 respectively, from fewer than 40 usually.

Property and mortgage agents said that sellers, under pressure to offload flats as the recession weighs on prices, could be open to helping buyers get higher financing ratios by declaring a lower transaction price and settling the rest separately. This could constitute both mortgage fraud and tax evasion, realtors said.

It can also distort market data that helps with pricing other flats, with HK$10 million transactions now representing close to 2 per cent of monthly totals.

“This can be done only in a turning market when bank valuation is leading the transaction price, otherwise banks may not approve the mortgage,” said Mr Eric Tso, a senior vice-president of mortgage agent mReferral Corporation.

Reuters could not verify whether any of the transactions were misrepresenting the full amount.

Bank officials, who declined to be named as they were not authorised to speak to the media, said they were aware of the trend and as a precaution did not approve applications if transaction values were 10 per cent to 20 per cent below the amount estimated by their evaluators.

Since the coronavirus outbreak emerged in January, banks also increased scrutiny on applicants who work in the retail, food and beverage and aviation industries, property sources said.

REUTERS

Read the latest on the Covid-19 situation in Singapore and beyond on our dedicated site here.

Get The Straits Times app and receive breaking news alerts and more. Download from the Apple App Store or Google Play Store now.

Source: Read Full Article