By the end of 2016, property foreclosures in Hong Kong are anticipated to double from current levels as a result of a slowing economy.
According to an auctioneer with more than two decades of experience in the industry, the foreseen slump will severely affect the borrowers' ability to pay off their mortgages leading to massive foreclosures.
In a phone interview with Bloomberg last December 11, AA Property Auctioneers Ltd Managing Director Tsang Kit-chun pointed out that following the first half of 2015, the average number of foreclosures has risen to 80 a month. He said that 60 percent of these foreclosures are residential properties.
The Jefferies Group analysts blame the increase of foreclosures on banks and other financial institutions. Because of their eagerness to call loans to owners who cannot afford mortgage payments, they have put the property market at risk.
As analysts predict a price plunge, Hong Kong developers such as Cheung Kong Property Holdings and Henderson Land Development have taken measures to continue luring buyers. They are now offering enticements such as stamp tax rebates and first and second mortgages.
Tsang, however, pointed out that there is still some good news despite the gloomy circumstances. In comparison to the 6,000-a-month pace in 2003, the current rate of foreclosure is still way slower, he said.
The last time that Hong Kong's property market was in trouble was in 1995 to 1997 during the Asian residential crisis. During the crisis, property prices rose to 71.5 percent or 54 percent in real terms. After October 1997, the house prices plummeted by 44 percent within a year. The prices further plummeted when Chief Executive Tung Chee-hwa pledged to construct 250,000 units of residential properties in the next ten years despite the housing slump. By mid-2003, residential prices fell by 66.1 percent or 61.8 percent in real terms and Hong Kong suffered massive foreclosures.
