The Hong Kong Monetary Authority (HKMA) on Friday issued guidelines to banks on a new round of prudential measures for property mortgage loans, to strengthen banks' risk management and resilience amid a hot housing market.

The measures are as follows:

1. Raising the risk-weight floor from 15 percent to 25 percent for new residential mortgage loans;

2. Lowering the applicable loan-to-value ratio (LTV) cap by 10 percentage points for property mortgage loans extended to borrowers with one or more mortgages;

3. Lowering the applicable debt servicing ratio (DSR) limit by 10 percentage points for property mortgage loans extended to borrowers whose income is mainly derived from outside Hong Kong.

The three measures take immediate effect. However, mortgage applications for transactions with provisional sale and purchase agreements signed today or earlier will not be affected for the second and third measures.

Norman Chan, chief executive of the HKMA, said: "The risk of overheating in the property market in Hong Kong continues to increase. According to the latest statistics, property prices in March 2017 have surpassed the recent peak recorded in September 2015."  

"Transaction volume for residential properties has increased by more than double from about 3,300 in January 2017 to about 7,000 in April 2017. Meanwhile, the keen competition for mortgage business in the banking sector has heightened the risk of overheating in the property market, and weakened the resilience of banks to cope with a downturn in the market. HKMA considers that there is a need to introduce new measures to strengthen the risk management of banks."

The HKMA says it will continue to monitor the property market closely, and will introduce appropriate counter-cyclical measures to safeguard the stability of the banking system.