Zhongyuan Mortgage: Positive factors for the property market will gradually increase in the second half of the year, and Hong Kong property prices are expected to stabilize within the year

According to the latest survey results released by the Hong Kong Monetary Authority today, the number of negative equity residential mortgages decreased to 30,288 at the end of the second quarter of 2024, a 5.5% decrease from 32,073 at the end of the first quarter, with the amount involved also decreasing by 6.2% to HKD 155 billion from HKD 165.3 billion. Wang Meifeng, Managing Director of Central Mortgage, stated that in the second half of the year, especially in the fourth quarter and next year, with the gradual increase of positive factors in the property market, including the Fed's rate cut in September this year, the expected decline in Hong Kong's prime rate in the fourth quarter, and the gradual improvement in bank mortgage lending attitudes, it is expected to increase market confidence. Buyers who take advantage of the low prices will increase market sentiment, and property prices are expected to stabilize within the year, with a chance for the negative equity figures to decrease by the end of the year.

Wang Meifeng, Managing Director of Central Mortgage, mentioned that property prices stabilized after the cooling measures in the first quarter, with prices softening by an average of 4% in the second quarter. The negative equity figures remained similar to the first quarter, believed to be due to the moderate decline in property prices during the quarter. The price movements and magnitudes of different housing estates varied, and some high loan-to-value borrowers in previous years reduced their mortgage balances by repaying principal, moving out of the negative equity category. Additionally, the government relaxed the loan-to-value ratio for properties below HKD 15 million to up to 70% in July last year, which also helped reduce the proportion of high loan-to-value mortgages in the market.

At the end of the second quarter of this year, there were 30,288 cases of negative equity, with property prices having fallen by an average of about 26% from the peak in 2021. Some recent cases of high loan-to-value mortgages, including 90% and 80% mortgages, have fallen into the negative equity category as prices have dropped below the 20% and 10% thresholds.

Looking ahead, Wang Meifeng mentioned that based on the recent decline in property prices from the second quarter to the present, it is not ruled out that the negative equity figures may rise in the next quarter. However, despite the average 4% drop in property prices in the second quarter, rents have increased by 3%, reflecting the continued strong demand for essential housing. More people are choosing to rent rather than buy as they adopt a wait-and-see attitude towards the property market. In the second half of the year, especially in the fourth quarter and next year, with the gradual increase of positive factors in the property market, including the Fed's rate cut in September this year, the expected decline in Hong Kong's prime rate in the fourth quarter, and the gradual improvement in bank mortgage lending attitudes, it is expected to increase market confidence. Buyers who take advantage of the low prices will increase market sentiment, and property prices are expected to stabilize within the year, with a chance for the negative equity figures to decrease by the end of the year