(Bloomberg) -- The value of mortgages in Hong Kong that have exceeded the worth of the homes jumped to the highest level in more than two decades as the city’s property market continues to struggle.
The value of negative-equity loans reached HK$207.5 billion ($27 billion) at end-September, up from HK$155 billion in June, according to the Hong Kong Monetary Authority. That’s the highest since at least 2002, according to data compiled by Bloomberg.
The number of such loans — also called “underwater” because the outstanding loan amount is bigger than the current market value of the mortgaged property — rose 34% from June to 40,713 by the end of last month, the most since 2003.
The negative equity cases were mainly bank staff home loans or loans under the subsidized mortgage insurance program, which have a higher loan-to-value ratio, HKMA said. The three-month delinquency ratio stood at 0.13% compared with 0.11% in the previous quarter.
Home sales in Hong Kong have picked up after the government loosened mortgage rules to allow lower downpayments earlier this month. But the residential market remains under pressure by still steep borrowing costs, a glut in new home supply and a weak economy.
Brokerage Jones Lang LaSalle Inc. predicted in July that there would be over 100,000 of underwater mortgages by year-end if prices continued to decline. Secondary home prices are now 7% lower since the beginning of the year, data from Centaline Property Agency show.
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