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Is Hong Kong Property Market In Crisis?

Is Hong Kong Property Market Facing Its Worst Crisis?

Hong Kong Property Market Sees Twenty Year High In Negative Equity Mortgages

The value of negative equity mortgages surged to a twenty-year high as Hong Kong property market faces a prolonged slump. The total value of such loans rose to HK$131.3 billion (S$22.5 billion) as of the end of December, up from HK$59.3 billion in September and it is the highest level seen since 2003 according to Hong Kong Monetary Authority (HKMA) statistics released on 31 January 2024.

The number of “underwater” housing loans more than doubled to 25,163 cases in December from three months earlier. A mortgage falls into negative equity, or “underwater”, when the outstanding loan amount exceeds the current market value of the mortgaged property.

Although many countries are facing a home prices declines in their property markets, the property market in Hong Kong is forecasted to be the hardest hit due to its connections with China. 

The property market in China started to stutter after Beijing rolled out a series of measures in 2020 aimed to curb excessive borrowing by its real estate developers. This led to many large and prominent developers such as Evergrande to default on its loan obligations, triggering fears of widespread contagion.

Demand for new housing in China is set to drop by around 50% over the next decade, making it harder for Beijing to quickly bolster the country’s overall growth. That’s according to the International Monetary Fund’s latest staff report on China, completed in late December and released Friday.

Savills recently predicted residential prices in Hong Kong, the Asian financial hub, will fall more than 10 per cent this year, the worst-performer among 30 global cities it monitors. If this rings true, Hong Kong’s property market and economy will be in crisis as the real estate crisis in China is likely to deepen. 

(Sources: The Business Times, CNBC)

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