Update | Hong Kong sees spurt in negative-equity home owners as property prices tumble
The number of Hong Kong homeowners who owe more than the value of their property has shot up for the first time in nearly a year and a half as property prices fall faster than expected amid a market turmoil while new flat supply is set to climb to a 12-year high.
The Hong Kong Monetary Authority (HKMA) on Friday announced that the estimated number of residential mortgage loans that are in so-called negative equity was 95 as of December, according to its latest survey. The total value of these home loans amounted to HK$418 million.
“This was the first time the surveyed authorised institutions reported negative equity cases since the end of September 2014,” said the HKMA. “These cases were mainly related to staff housing loans of banks, which have higher loan-to-value ratios.”
Negative equity occurs when a home loan exceeds the market value of the property. Since the number of negative-equity homeowners reached a peak of 105,697 in 2003, when home prices plunged up to 70 per cent, no such cases were reported until the third quarter of 2014.
Hong Kong developers have lately been lending aggressively to push sales. In October, Kowloon Development started providing through its financial arm loans of up to 95 per cent of the flat value without income proof, to boost sales of its Upper East project in Hung Hom. The developer had then said that buyers of about half of the 900 units it sold opted for the 95 per cent loan financing scheme.
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Henderson Land Development has been offering buyers of Eltanin Square Mile in Mong Kok a 30 per cent loan-to-value second mortgage on top of the standard 60 per cent mortgage they can obtain from banks.
