2016年CRI Negative Equity Cases Soar in Hong Kong Amid Falling Prices

In a disturbing trend for newer home owners in Hong Kong, the city's Monetary 1 Authority has revealed cases of 'negative equity 2' have increased 14-fold through the first three months of this year, with over 14-hundred additional home owners dealing 3 with it.

'Negative equity' refers to the scenario 4 where the current market price of the property is below what the owner has in their outstanding mortgage.

Ivy 5 Wong with Centaline Mortgages says the growing trend is something home owners in Hong Kong need to be aware of.

"The current price is 13 percent lower from the peak, if the mortgage is over 90 percent, it is likely to be a negative equity."

Hong Kong's Monetary Authority has repeatedly tightened 6 the mortgage rules to cool down the market.

Right now, if you want to buy a house you want to live-in yourself in Hong Kong which costs less than 7-million, you're going to have to put down at least 40-percent.

However, Wan 7 Wai Ming, General Manager of K. Wah Real Estate, says lenders associated with property developers are finding ways to get around those rules.

"For average people, it's pretty difficult to come up with a 40-pecent down payment for a two-bedroom apartment in Hong Kong. And because developers see continued demand from first-time buyers, they want to provide them with financial help. They will reference the guidelines from the Hong Kong Monetary Authority, but will 'fine-tune' the limit."

Hong Kong economist 8 Andy Kwan says they can do this by finding loopholes in the regulations, which he says is essentially 9 predatory lending.

"If a secondary mortgage is taken out which goes beyond the regulations, which can't the monetary authority do anything about it? If you can't make your payments to loans from mortgage companies, it means you're among the group which aren't truly able to afford to buy a property. And once the market plunges 10, these people are the first to be hit. It will be a disaster for them."

Despite these concerns, Hang Sang Bank Chief Executive Rose Lee says it's still too early to be talking about a property market crash in Hong Kong right now.

"Even though the number of negative equity cases has jumped from dozens to over a thousand, the numbers are still not very high. Most of the home-owners with negative equity have mortgages with over 90 percent left. But they are the homes of the borrowers themselves, and most of them still have the ability to repay their loans."

Despite attempts by authorities in Hong Kong to keep the property market stable, which has included higher stamp duties, Hong Kong's property market still remains 11 one of the least affordable 12 in the world.

But as the retail 13 sector 14 continues to struggle in Hong Kong, there are growing concerns about a ripple-effect.

Still, the Hong Kong government has no reported plan to loosen its restrictions 15, saying the city's Monetary Authority is still closely monitoring the property market, and says it will take steps to maintain the stability of the banking 16 system, if necessary.