Hong Kong hit by first wave of negative equity in two years as home prices fall

The aggregate value of mortgages in negative equity hit $1.19b in Q4.

Reuters reports that Hong Kong witnessed its first cases of negative equity on residential mortgage loans in nearly two years as home prices continued tos spiral downwards to track with the weakening residential property market.

Also read: Hong Kong housing is still the world's least affordable for ninth straight year

There are an estimated 262 cases of negative equity in the October-December quarter, which were related to bank staff housing loans or loans under a mortgage insurance programme, according to the Hong Kong Monetary Authority.

The aggregate value of residential mortgage loans in negative equity during the quarter was $1.19b and the unsecured portion of these loans amounted to $58m.

Also read: Hong Kong faces world's greatest housing bubble risk

Negative equity, which happens when a home loan exceeds the market value of the property, peaked in 2003 after the Sars outbreak. There were zero cases of negative homeowner equity in 2017 for the first time in records going as far back as 2001, data from Bloomberg show.

Hong Kong home prices dropped 2.4% in December from the previous month, data from the Rating and Valuation department show, as trade tensions escalate and stock markets slump. For the full-year 2018, prices inched up 1.6% to record their smallest gain in ten years.

Real estate consultant JLL expects residential property prices to fall 15% in 2019 to end nearly ten years of bull-run in the world's least affordable property market.

Here’s more from Reuters:

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