Hong Kong’s commercial banks are cutting their valuations of mortgaged homes as they bow to the double whammy impact of a viral epidemic with months of protests, in a move that could drive even more borrowers into negative equity and provoke panic selling, reported the South China Morning Post.
The weekly Centa Valuation Index (CVI) compiled by one of the biggest real estate agencies in the city plummeted by 3.52 points to 12.5 last week, the lowest level since January 2019. The lower the reading, the more bearish banks become of prospects in the real estate industry, and the more likely banks they are to cut their valuations of mortgaged property.
“The attitude of major banks towards home mortgages has cooled since the Lunar New Year in late January, as the coronavirus continued to spread,” said Centaline Property’s senior associate research director Wong Leung-sing. The CVI “will continue to drop in the coming weeks, and may even dip below 10,” he said.
The declining valuation could push borrowers further into negative equity, where the market value of a property is less than the outstanding amount of a mortgage secured on it. The potential indebtedness would drive mortgage borrowers into panic selling, creating a downward spiral that push prices lower.