(Bloomberg) -- The value of mortgages in Hong Kong that have exceeded the worth of the homes surged to a two-decade high amid a prolonged slump in what’s forecast to be one of the world’s worst property markets this year.

The value of negative-equity loans jumped to HK$131.3 billion ($17 billion) at the end of December, up from HK$59.3 billion in September and the highest level since 2003, according to Hong Kong Monetary Authority statistics released Wednesday. The number of such loans more than doubled to 25,163 cases in December from three months earlier. A mortgage falls into negative-equity, or “underwater,” when the outstanding loan amount exceeds the current market value of the mortgaged property.

 

Though many property markets around the world face declining home prices amid higher borrowing costs, Hong Kong is facing additional headwinds such as its reliance on a slumping China. Savills Plc recently predicted residential prices in the Asian financial hub will fall more than 10% this year, the worst-performer among 30 global cities it monitors.  

Read More: High-End Home Prices Set For Slump From Hong Kong to New York

The negative-equity loans account for about 7.1% of the outstanding value of all mortgage loans, according to HKMA statistics. 

Developer shares fell on Thursday alongside Hong Kong stocks, with CK Asset Holdings Ltd. declining 1.3% and Sun Hung Kai Properties Ltd. dropping for a fourth day.

The amount of underwater loans resulted from declining property prices, HKMA deputy chief executive Arthur Yuen said at a press briefing Wednesday prior to the data release. The de-facto central bank is closely monitoring repayments, which is under control, and the delinquency ratio of 0.03% remains low, he said.

The Asian financial hub remains in a property downturn first sparked by high borrowing costs, macroeconomic concerns and a population decline. The market last year posted the fewest number of transactions in 33 years and its home prices dropped to the lowest since 2017. While the government has introduced a range of measures to boost transactions, analysts forecast residential values to stay flat or fall further this year. 

The rise in the number of underwater mortgages means that lenders will struggle with losses and foreclosures, according to Bloomberg Intelligence analysts Francis Chan and Patrick Wong. Delinquencies could lift credit costs at banks such as the Bank of China Hong Kong Ltd. and Hang Seng Bank Ltd., they wrote in a note.

--With assistance from Shawna Kwan.

(Updates with developer shares in fifth paragraph)

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