Hong Kong Homeowners Have Zero Negative Equity as Prices Soar

A rising tide lifts all boats, and nowhere is this truer than in Hong Kong’s unstoppable property market.

There were zero cases of negative homeowner equity in Hong Kong in 2017, for the first time in records going back to 2001, when the Hong Kong Monetary Authority began compiling the statistic. Secondary home prices have climbed 313 percent since their 2003 trough, when mortgage debt exceeded home values in 356,253 cases, according to the Apple Dail

Property prices that are continuing to surge should provide a significant cushion for people rushing in to buy homes, as most analysts predict prices to climb another 10 percent in 2018. Anyone buying today would still be on solid ground in the future unless prices were to slump 50 percent.

The fact that not a single homeowner is under water comes despite the most stringent lending limits on banks, restricting new mortgages to just 50 percent for homes valued at HK$7 million ($895,000) or more.

Still, what the HKMA data doesn’t capture is the amount of debt households have with property developers, who have been topping up bank mortgages to as much as 120 percent leverage, putting buyers of new homes in much more risky territory.