By Clare Jim and Twinnie Siu

HONG KONG (Reuters) -Hong Kong is raising the cap on loan-to-value (LTV) ratio for properties worth up to HK$30 million ($3.83 million) for self-use homebuyers, the Hong Kong Monetary Authority (HKMA) said on Friday, the first relaxation of tightening measures for home transactions since they were implemented in 2009.

The adjustments, effective Friday, aim at helping residents to buy or upgrade their homes as prices have corrected 13% since their peak in 2021, HKMA Chief Executive Eddie Yue told reporters.

Self-use homebuyers will be able to borrow as much as 70% on residential properties worth up to HK$15 million, and 60% for properties worth between HK$15 million to HK$30 million. The ratios were both increased from 50%.

LTV ratio is the percentage of a property’s value that is mortgaged. A relaxation on the ratio cap means prospective home buyers will not need so much money up front.

“Even with these adjustments, the Hong Kong banking sector has ample buffers to cope with any challenges from a sharp correction in property prices, therefore we consider there’s enough room to relax these measures,” Yue said.

For homes valued more than HK$30 million, and all non-self-use residential properties, the maximum LTV ratio will remain unchanged at 50%, HKMA added.

The maximum LTV ratio for non-residential properties will be adjusted to 60% from 50%.

Market participants have been urging the government to relax property market curbs, including removing extra stamp duties for second-time homebuyers and non-citizens, after home prices in one of the world’s most expensive markets dropped 15% last year.

Following four months of gains in the beginning of the year, Hong Kong private home prices registered a monthly fall of 0.7%in May, as many home buyers stayed on the sidelines amid uncertainty over interest rate hikes and the economic outlook.

The city’s top officials have said in several occasions that the market correction had been orderly and the government had no plan to remove tightening measures aimed at curbing speculations.

($1 = 7.8276 Hong Kong dollars)

(Reporting by Clare Jim and Twinnie Siu; Editing by Toby Chopra)

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