Hong Kong housing slump deepens as borrowers in negative equity triple amid coronavirus pandemic
- The number of home mortgages in negative equity rose to 384 at the end of March from 128 at end-2019, HKMA says
- Analysts caution market correction is not over yet amid lingering pandemic effects
Hong Kong’s housing market crisis deepened this year as more owners were caught in so-called negative equity as the coronavirus pandemic depressed home prices to near the lowest in a year.
The number of residential mortgages in negative equity – where the outstanding loan amount exceeds the current market value of the underlying property – tripled to 384 at the end of March from end-2019, the Hong Kong Monetary Authority said on Wednesday. That is the highest level since 1,307 in the second quarter of 2016.
While the number came below market expectation, the industry could see higher count in the current quarter as unemployment increased and economists maintained bleak forecasts for the city’s economy.
“The pandemic is still a tremendous cause for caution to the economies of Hong Kong and the world,” said Eric Tso, chief vice-president at mReferral Mortgage Brokerage Services. “Home prices still have room for downside in the second quarter. If so, the number of negative equity cases will rise further.”
Still, Tso noted that 384 is still way below the 10,949 cases recorded at the height of the financial tsunami in 2008, and 105,697 during the Sars (severe acute respiratory syndrome) outbreak in 2003.
The increase in such cases in the current market downturn is unlikely to reach those historic peaks, he added.
Besides, banks including HSBC will extend their offer of a moratorium on principal repayments for mortgages associated with residential units under the Hong Kong Housing Authority’s Subsidised Sale Flats Scheme.