Hong Kong's negative equity residential mortgage cases dropped to 3,819 at the end of the third quarter, marking a 12.3% quarter-on-quarter decrease from 4,356 cases in the previous quarter. The involved loan amount also fell to HKD 17.3 billion from HKD 19.6 billion. This is the lowest level seen in 13 quarters for both the number of cases and the loan amount. Negative equity in mortgage loans without collateral decreased to HKD 80 million from HKD 90 million at the end of the second quarter. The overdue ratio rose to 1.34%, which, despite the larger decrease in the involved loan amount compared to the overdue amount, represents an increase from 1.25% in the second quarter. According to the Hong Kong Monetary Authority (HKMA), negative equity cases are mainly concentrated in mortgage loans for bank staff or those covered by the mortgage insurance program, which are usually higher in mortgage-to-value ratios.
The Hong Kong Property Industry Association's Paul Currie noted that the negative equity rate remains relatively low considering the market's stabilization in the third quarter. Although the number of months past due slightly increased, the actual number of negative equity cases decreased, reflecting homeowners' strong repayment capacity. Since the price drop was short-lived and many homebuyers have reduced their reliance on high-pledge mortgages, the number of negative equity cases continues to decline. Furthermore, following a regain in private residential price indices for August and September, coupled with interest rate levels, bank confidence in residential mortgage business is likely to persist. Thus, if the market remains stable in the fourth quarter, there could be further decreases in negative equity cases. Additionally, Currie stressed that the overdue mortgage rate for more than three months remains low, indicating a robust property owner base. The increased assurance in property risk from banks means they are more likely to offer various mortgage schemes and incentives.
The HKMA's survey only includes one mortgage loan for each owner where the outstanding loan amount exceeds the current market value of the property, which means it does not account for cases where a second mortgage is involved. As such, the exact number of negative equity cases is not fully captured. Despite a small increase in the overdue mortgage rate for more than three months, the actual number has decreased, underscoring the health of the local property market. The expected continued introduction of mortgage deals and promotional offers by banks will contribute to a more robust mortgage market.