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Mr. Malhar S Nabar and Mr. Ashvin Ahuja

on the experience of Hong Kong SAR, a currency board economy, in its attempt to cool down the property market and limit related systemic risks to the banking system through active use of LTV caps and, increasingly, government-initiated land sale policy. The main findings are as follows. Across the broader sample as well as in the subset of economies with pegged exchange rates and currency boards, the use of LTV caps tends to have a decelerating effect on property price growth. In addition, both LTV and DTI caps slow the growth of lending to the property

Mr. Malhar S Nabar and Mr. Ashvin Ahuja
We assess the effectiveness of macroprudential policies against a number of different indicators of property sector activity and financial stability. At the cross-country level the use of LTV caps decelerates property price growth. Both LTV and DTI caps slow property lending growth. LTV caps also affect a broader range of financial stability indicators in economies with pegged exchange rates and currency boards. For Hong Kong SAR, LTV policy tends to be forward looking, with caps lowered to counter downward movements in mortgage rates, and higher growth in mortgage loan and volumes of transactions. The reduction in caps appears to respond to small and medium size flat price appreciation, and contributes to a decline in high-end volume growth after a year and total transactions volume growth after 1½?2 years. Price growth responds favorably after 2 years. The evidence suggests LTV tightening could affect property activity through the expectations channel rather than through the credit channel.
Mr. Jiaqian Chen and Mr. Francesco Columba

average LTV ratio for new mortgage borrowers has stabilized at around 70 percent, halting a rising trend which led the average LTV ratio to reach about 72 percent in 2010. Nonetheless, about half of the new borrowers in 2014 had an LTV ratio just below the cap. In a context of double digit growth rates for house prices, house purchasers could thereby increase their DTI ratio while still meeting the 85 percent LTV cap. 3 The Model To analyze the costs and benefits of macroprudential and monetary policies in reducing household debt we use a DSGE model with