(Bloomberg) -- Hong Kong’s relaxation of mortgage rules for first-time buyers of homes under construction is unlikely to lift a property market that’s been burdened by high borrowing costs, according to analysts.

New rules allowing such homebuyers to put down smaller deposits will have a “negligible” impact on demand, said Citigroup Inc. analyst Ken Yeung. A potential increase in mortgage rates before year-end might dissuade buyers, Bloomberg Intelligence said. 

The move announced late Friday is the most recent effort by Hong Kong authorities to support the housing market, which has slumped as surging interest rates deter buyers. Developers have been under pressure to cut prices of new homes, with Li Ka-shing’s CK Asset Holdings Ltd. recently pricing a project at a seven-year low.

Shares of major developers fell on Monday morning. CK Asset, Henderson Land Development Co., Sun Hung Kai Properties Ltd. and New World Development Co. all dropped at least 1% in Hong Kong. 

Under the new rules, eligible first-time buyers can borrow up to 90% of the value of a property under construction worth as much as HK$10 million ($1.3 million). Previously, buyers of such properties valued between HK$6 million and HK$15 million were subject to a 70% loan-to-value ratio, resulting in higher down-payment requirements.

The policy change may push major developers to speed up pre-sales in the fourth quarter, according to Bloomberg Intelligence analysts including Patrick Wong. 

However, “a potential increase in mortgage rates before year-end might limit the impact,” they wrote in a note. The move may also cause secondary home prices and sales to drop further as it encourages more buyers to acquire new apartments, they said. 

Yeung said Citigroup expects the downtrend in home prices to accelerate in the fourth quarter amid potentially higher mortgage rates. Secondary home prices have risen 1.3% since the beginning of the year, after losing momentum in the first quarter.

Home values may drop 2% to 3% for the full year if the government doesn’t roll out more measures, said Sammy Po, chief executive officer of the home division at Midland Realty. 

While the move will hand more purchasing power to buyers of new homes, it won’t boost the overall property market unless the government relaxes stress-test requirements, Po said. Buyers currently must go through a test that ensures their income is enough to afford future rate increases if they take on mortgages.

Two months ago, the government loosened mortgage rules for the first time since 2009, allowing buyers to purchase apartments with lower down payments. Existing-home prices have slid 17% from their peak in 2021.

“Simply relaxing mortgages on unfinished properties is not targeting the problem,” Po said. 

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