Number of Hong Kong mortgage holders with negative equity soars to 20-year high, most since Sars epidemic

Name: How Hong Kong's housing market became among the world’s most unaffordable
Uploaded: 2024-04-30T11:58:54.000Z
Duration: 13 min
Description: How Hong Kong's housing market became among the world’s most unaffordable

The number of Hongkongers with negative-equity loans stood at 32,073 in the first quarter, the most since some 40,000 cases were recorded in the first quarter of 2004

Aggregate value of ‘upside down’ loans rises to HK$165.3 billion (US$21.1 billion), compared with HK$131.3 billion at the end of December.

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A pedestrian walks past a property agency in Hong Kong. Property prices in the city rose for the first time in 11 months in March. Photo: AFP

Salina Li

Published: 7:58pm, 30 Apr 2024Updated: 10:54am, 2 May 2024

Hong Kong’s declining home prices dragged more mortgage borrowers into negative equity, putting them under greater financial strain as property prices show little prospect of rising amid a lethargic housing market and high interest rates.

The number of so-called upside down loans almost tripled to 32,073 in the first quarter from the fourth quarter of last year, according to data released by the Hong Kong Monetary Authority (HKMA) on Tuesday. These were the most since some 40,000 cases were recorded in the first quarter of 2004 following the severe acute respiratory syndrome (Sars) epidemic, according to data from mortgage broker mReferral.

The aggregate value of negative-equity loans rose to HK$165.3 billion (US$21.1 billion), compared with HK$131.3 billion at the end of December.

“As property prices have fallen by more than 20 per cent from their peak, most homeowners who entered the market with a high loan-to-value ratio from 2019 to 2022 have a greater chance of falling into negative equity, resulting in an increase in the number of negative-equity cases,” said Eric Tso Tak-ming, chief vice-president of mReferral.

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How Hong Kong's housing market became among the world’s most unaffordable

He added that although property prices rose slightly in March, there is a backlog of new home supplies and developers continue to sell new properties at low prices, which has kept second-hand property prices under pressure, making banks cautious in their valuations.

Prices of Hong Kong’s second-hand homes rose by 1.06 per cent in March, the first increase in 11 months, as the removal of cooling measures in the budget gave a much-needed boost to the beleaguered property market. Home prices are still 13.2 per cent lower than a year ago and 23 per cent down from an all-time high in September 2019. So far this year, they have slipped by about 1.8 per cent.