Aiden He
The number of residential mortgages in negative equity – where the loan is bigger than the value of the home – more than tripled quarter-on-quarter past the 11,000 mark at the end of September.
And the figure may become even larger this quarter amid a property market slump.
The estimated number of 11,123 was 233 percent higher than the 3,341 cases in June but below the over-18-year-high of 12,164 set at the end of last year, data from the Hong Kong Monetary Authority showed.
It accounted for nearly 2 percent of the total number of mortgage borrowers.
The aggregate value of these loans also jumped from HK$17.4 billion in June to HK$59.3 billion in September, though it was still lower than HK$66.3 billion – the highest since the fourth quarter in 2003 – seen at the end of 2022.
Negative-equity loans accounted for 3.2 percent of the total value of outstanding mortgage loans as of the end of September with the unsecured portion of the debts surging to HK$1.98 billion from HK$305 million in June.
These cases were related to bank staff housing loans or loans under mortgage insurance programs, which generally have a higher loan-to-value ratio, the HKMA said in a statement yesterday.
Under the mortgage insurance program, first-time homebuyers can borrow up to 90 percent of the price of a property with a cap of HK$9 million.
This means if home prices drop by more than 10 percent, owners will be in negative equity, or owing more on a mortgage than the value of their home.
Private home prices slumped by 3.6 percent in the third quarter from three months earlier amid high rates and a struggling economy, evaporating all the increases since the border reopening.
They were nearly 17 percent below the all-time high in September 2021.
To revive the market, the government has halved stamp duties for nonlocals and those who are not first-time homebuyers and shortened the period sellers needed to pay tax from offloading properties.
It has also allowed eligible incoming skilled professionals to defer the payment of the revised stamp duties totaling 15 percent for their first home.
Although the market sentiment is gradually improving following the measures, the effect will take a while to show, said Eric Tso Tak-ming, chief vice president of mReferral Mortgage Brokerage Services.
Transaction volumes may rebound this quarter but not prices – and that means negative-equity numbers may stay high until the first half of next year, Tso said.
Centaline Mortgage managing director Ivy Wong Mei-fung also believes the figure will increase further in the fourth quarter but remain at a low five-digit number.
Though the number rose significantly last quarter, credit risks from it will remain small, given the low delinquency ratio and unemployment rate, Wong pointed out.
The three-month delinquency ratio of these loans fell to 0.02 percent at end-September from 0.09 percent three months earlier.
Hong Kong’s jobless rate stood at 2.8 percent in July-September.
Also, the proportion of buyers applying for mortgage insurance has fallen since the HKMA raised the maximum loan-to-value ratio of bank mortgages to 70 percent in July, which will limit the risk of their properties falling into negative equity as they borrow less, Wong said.
Still, the downward pressure on prices will probably continue to persist next year with some property agencies like Colliers seeing an up to 10 percent fall for small to mid-sized homes in 2024 as interest rates stay higher for longer.
The HKMA also said mortgage loans approved in September sank by 28.4 percent compared with August to HK$25.5 billion though the number of applications rose by 2 percent to 8,787.
aiden.he@singtaonewscorp.com
The post Negative equity cases triple | The Standard appeared first on Hong Kong News Hub.
from
https://hongkongnewshk.com/negative-equity-cases-triple-the-standard/
No comments:
Post a Comment