Hong Kong Sees Surge in Negative Equity Residential Mortgage Loans

The Hong Kong Monetary Authority (HKMA) has revealed a concerning increase in residential mortgage loans (RMLs) in negative equity as of the end of September 2024. According to the HKMA, the number of these loans rose to 40,713 cases, a notable jump from the 30,288 cases reported at the end of June 2024. This rise is primarily linked to bank staff housing loans and RMLs under the mortgage insurance program, which typically feature higher loan-to-value ratios.

Increasing Aggregate Loan Values

The total value of RMLs in negative equity expanded significantly to HK$207.5 billion by the end of September 2024, from HK$155 billion in June 2024. In tandem, the unsecured portion of these loans increased to HK$15.8 billion from HK$10 billion over the same period, indicating a growing financial burden on homeowners.

Stable Delinquency Rates

Despite the increase in negative equity cases, the three-month delinquency ratio for these loans remained relatively stable, registering a slight rise from 0.11% in June 2024 to 0.13% by the end of September 2024. This suggests that while more homeowners are in negative equity, the number of those falling behind on payments has not increased dramatically.

Scope and Limitations of the Survey

The HKMA survey specifically focuses on RMLs provided by authorized institutions as first mortgages, where the outstanding loan amount exceeds the current market value of the property. However, the survey does not account for RMLs associated with co-financing schemes that might also be in negative equity if second mortgages were considered. The lack of data on second mortgages means the full extent of negative equity could be underestimated.

The data collected represents approximately 99% of the industry total, providing a comprehensive view of the banking sectors exposure to negative equity in Hong Kong.

For further details, you can visit the Hong Kong Monetary Authority.