The number of home loans in negative equity shrank 25 per cent in the third quarter, thanks to rising property prices.
There were 3,500 homeowners whose property values were less than their mortgages in the quarter, compared with 4,676 in the previous quarter, according to the Hong Kong Monetary Authority.
The combined value of negative equity mortgages was HK$6 billion in the third quarter, compared with HK$8 billion in the second quarter, it said.
Hong Kong's negative equity problem was sparked by the financial crisis in 1998 when property prices plunged and remained sluggish for years.
At the peak in June 2003, there were 106,000 negative equity mortgages in the city with a combined value of HK$165 billion.
The Centaline Property Agency's Centa-City Index, which tracks home prices including secondary flats in 45 major housing estates, was 59.36 points on October 28, the highest since May 1998. However, it remains substantially lower than the 100 points in July 1997 when the market peaked.