What would it take for homeowners to throw in the towel and default on mortgages? Local folklore says Hong Kong people would first sell their grandmothers and boil down tree bark. Yet, the single biggest threat to economic stability remains mass defaults.
We are a long way from that point. A refugee population that escaped poverty, found shelter, endured financial panics and ultimately profited richly will not lose its nerve over night. This is a town raised in the school of hard economic knocks and knows all about market cycles.
Still, Asia's economic woes warn against ignoring valuation basics - earning 5 per cent while paying the bank 15 per cent cannot last forever. Guilt by association? Maybe, but the problem for all Hong Kong hawks is a lack of meaningful data.
Take the key ratio of household income to mortgage re-payments. Should mortgage rates hit 15 per cent, a Hong Kong family earning $34,000 per month, owning a $5 million flat bought with a 70 per cent mortgage would spend every penny servicing their debt, estimates Goldman Sachs. Many households are spending 70 per cent of their pay this way.
Scary stuff when white collar professionals are losing their jobs and economic uncertainty looms large. Particularly, when you consider similar ratios in most developed countries are in the 25 to 30 per cent range.
Undoubtedly, most of this year's first-time buyers are in a sticky situation. Many have mortgages worth more than their property and face rising local interest rates.
But how generalised is this picture of struggling families scrimping to keep the banks from the door? Analysts rely on census data for average income, a measure that accounts only for salary earnings. Elsewhere, governments cross refer to sources such as the Inland Revenue Department to ensure a more accurate picture of income.