Hong Kong's negative equity problem has eased along with the rise in the property price, and it is believed that as the property market keeps its uptrend, the problem will not feaze Hong Kong anymore very soon.

According to the Hong Kong Monetary Authority (HKMA), the number of residential mortgage loans (RMLs) in negative equity declined from a peak of around 106,000 cases worth about 165 billion Hong Kong dollars (21.15 billion US dollars) in June, 2003, to 19,200 cases last December with an aggregate value of 33 billion Hong Kong dollars (4.23 billion US dollars).

The figure represented a decline of over 80 percent from the peak. Compared with last September, the number fell 24 percent.

The HKMA said the improving employment market strengthened borrowers' repayment ability and improved the quality of banks' consumer lending.

Chief Executive of HKMA Joseph Yam Chi-kwong said the negative equity number should drop further as the property price continued to rise and people kept paying their installments. He said negative equity had ceased to have much impact on the stability of the banking system.

Some local property analysts expected the negative equity problem would be totally solved by the middle of this year.

The chief analyst of the local property agency Midland Realty, Lau Ka-fei, believed that in the most serious case of negative equity, the difference between the outstanding loan amount and the assessed value of the property is just around 10 percent. Most of those negative equity owners bought their property in 1997.

Lau expected that if the property price rose 15 percent this year, then the negative equity problem would be solved in the middle of this year. The continuing reduction of the number of the RMLs would swell the local confidence to the consumption and property market, and arose more demands for the house.

According to Franklin Lam, head of Hong Kong Equities at UBS, the home price in Hong Kong will rise around 10 percent in the first quarter of this year, as pent-up demand is released after the Chinese New Year and as sentiment improves on the back of someof the easiest mortgage terms on offer ever in Hong Kong.

Lam said they were confident that there would be a trend rise in consumption and investment over the next five years, and UBS expected the home price in Hong Kong to rise by 45 percent by 2005 and 2006.

Source: Xinhua