Exclusive‘Spicy policies’ helped fortify Hong Kong’s market, save homeowners from negative-equity trap, defaults, ex-HKMA CEO Chan says
- Eight rounds of mortgage tightening under Chan’s watch, dubbed as ‘spicy policies’, helped the city tackle property speculation, fend off widespread defaults
- Negative equity has not been an issue in Hong Kong’s property market since it peaked at 103,000 cases in 2003
Hong Kong is better prepared now than it has been in the past 25 years to withstand future financial crises, with leverage among homebuyers in the world’s most expensive urban centre at the lowest level since 1997, the city’s former central bank chief said.
That strength is reflected in the mortgage-to-property value ratio, which stood at 53 per cent at the end of 2021, according to official data, versus 64 per cent in 2009 and as high as 70 per cent in 1997. Its stringent mortgage financing rules have helped the city ride out two of its biggest crises over the past two decades.
“These mortgage tightening policies are vital to safeguard the banking system against the risk of widespread default in mortgage loans, which was a painful lesson learned from 1997 until 2003 when the property price went down by more than 60 per cent,” said Norman Chan Tak-lam, former CEO of the Hong Kong Monetary Authority.
“This is one of the main reasons we could cope with the 2009 global financial crisis, the shocks arising from the social unrest in 2019 and the pandemic since 2020.”
