Posted by
Rumi
16 yrs ago
Just wondering if the current situation in the US could happen here in HK.
With property values having fallen a lot from last year, I would suspect that a number of people are now in a negative equity situation.
Is it possible for people to walk away from their properties in HK (i.e. mail the keys to the bank) and leave the bank with a glut of foreclosures on their hands?
Do the banks here ever have foreclosure sales, or do they hold the property owners liable for all outstanding debt?
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Is that strictly true 100% of the time? Just asking out of personal ignorance, but I thought banks had the right to demand additional repayments to make up the difference between the outstanding balance and the lower value of the property secured, with repossession being the consequence of failing to do so, irrespective of the borrwer's ability to service monthly mortgage repayments and their credit history?
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AFAIK all mortgage in HK are recourse loans, meaning that even after your flat is repo'ed you have to repay the bank the difference (if any). I.e. no walking away from the flat and the loan. I assume that the bank will have to start bankruptcy proceedings to recover the "negative equity" part.
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Rumi
16 yrs ago
OK, so now with a sudden doubling of property owners who are in negative equity, one would expect a certain percentage to unfortunately fall into one of the categories you mentioned above i.e. job loss, divorce etc. and be forced to dispose of their property.
For arguments sake, let's say 50 people (roughly 2%) of those in negative equity are forced sellers. Do the banks ever advertise these distressed assets like they do in US newspapers or are the sales somehow handled internally through an agent of the banks choosing?
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Re: auctions, you may be interested in an earlier thread
http://hongkong.asiaxpat.com/forums/hong-kong-property/threads/109053/property-foreclosure-auctions-know-where-?/
and if you have access to some one who can read Chinese:
http://www.chungsen.com.hk/auction/search.asp?date1=2009%2F1%2F6
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And if there is something in Chinese you need to understand there is always Google translate; works great for webpages as well.
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Auction info 2009-1-6 for example;
http://www.chungsen.com.hk/auction/search.asp?date1=2009%2F1%2F6
Translated by Google (not sure if this link works);
http://translate.google.com/translate?hl=en&u=http%3A%2F%2Fwww.chungsen.com.hk%2Fauction%2Fsearch.asp%3Fdate1%3D2009%252F1%252F6%0D%0A%0D%0A&sl=zh-CN&tl=en
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Rumi
16 yrs ago
Thanks for all the great information everyone. Very helpful indeed!
Now I was also wondering if there is anywhere to view the most recent listings and transactions of residential property.
I have checked the various local agent websites (i.e. centaline, midland etc), but all the listings/tranactions provided seem to be grossly out of date.
Is there a site that has current information available?
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There is NO CHANCE of HK following the foreclosure scenario mentioned....the difference is Hong Kong has it right and the USA doesn't (which should come as no surprise)...the US system became totally out of whack with the concept of 'pride of ownership and lent NON_RECOURSE money based NOT on a promise to pay but rather on the pumped up "value"???? of the real estate solely....this is DUMB in any arrangement but REALLY dumb if you are trying to engender home ownership NOT speculation. Hong Kong, thank the Brits, is NOT the USA ...thankfully neither is the UK, HK, Canada nor Australia....in those countries, when you finance/borrow money, your a** is on the line not just a piece of spec property....makes a HUGE difference when it comes to "walking away from property".......the banks in those countries should and will pursue those into bankruptcy who borrow money and don't repay....after all it is the money of SAVERS they have blown......
Big Red Indian
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Rumi
16 yrs ago
Investmentadvisors, I don't think your comments above are entirely true. There is plenty of speculation on property in HK (just look at the number of postings on this site for starters) and banks here, up until recently, were only too happy to lend money out for inflated property values just like they did in the UK, USA, AUS, CAD etc.
As a result, I would think that your axx is on the line here in HK just as much as in the US if you didn't make your payments. At the end of the day it doesn't really matter if your mortgage is based on an inflated value or not. If you stop making payments for any reason the bank will be wanting an explanation.
But this raises another question. Are there any 'Mortgage Insurance' plans sold here that would cover your payments if you were to lose your job or fall sick/become disabled?
I have seen ones that will pay your mortgage in the event of your death, but not any that are designed for living scenarios.
I would think if such policies existed here, then that would lend a better argument for why property owners are less likely to walk away.
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investmentadvisors> Most property markets bust due to excessive speculation (caused by easy credit), not because home owners walk away. Walking away will affect your credit rating very badly, even in the US of A, and it should not be taken lightly.
IbuBapek> Of course they don't. Only if you fail to meet your mortgage payments you are still liable for the difference. There are no margin calls on a mortgage because property prices drop.
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Hankt
16 yrs ago
Wycourt,
This was a bit wide of the mark: "First you will see the rent go down. Because the return from rent is higher than interest rate in the bank prices do not fall."
Reasons:
1) Current tennants negotiate as their leases expire: not according to market conditions
2) Changes in interest rates do not make landords change their lease rates. Consider the following changes to a 10 year HKD2m mortgage:
rate monthly payment
0.02 $18,402.69
0.0225 $18,627.47
0.025 $18,853.98
Besides, we all know that HK landlords are the last people on the planet, except maybe the homeless in NY's Central Park, to admit to HK real estate price/value drops and will let apartments go empty rather than negotiate down. This causes a false market in rents.
Hank
(h.t@bloomberg.net)
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