Home foreclosures in Hong Kong are double what they were last year, and the situation is likely to get worse as more owners struggle to pay back high-interest loans. Reuters' Eve Johnson explains how buyers are getting their hands on easy money.
Shaky times for property in one of the most expensive places on earth to own a home... Foreclosures in Hong Kong are on the rise - nearly double their level last year. And experts warn it's bound to get worse. Hong Kong has rules in place to keep the bubble from bursting in its red-hot property sector.... ...like only letting buyers borrow a maximum of 60% of a property's value. But that only applies to bank loans. Reuters' Clare Baldwin says unregulated lenders like finance companies are changing the game. SOUNDBITE (English) CLARE BALDWIN, REUTERS CORRESPONDENT, HONG KONG, SAYING: "Finance companies are offering loans on very harsh terms at higher levels than are officially recognized by Hong Kong's de facto central bank. Just as point of context, some of the finance companies will lend up to 90% plus of the value of that property, which means it's very easy for the value of that property to go under water." Buyers are finding themselves in trouble as the economy slumps and their incomes take a hit. Now they're struggling to pay back not only huge loans but also interest rates of up to 30 percent And it's not just ordinary folks taking a hit. SOUNDBITE (English) CLARE BALDWIN, REUTERS CORRESPONDENT, HONG KONG, SAYING: "The people who are affected are across all types of homeowners. But the ones that are most interesting to us right now are the ones that are purchasing the luxury flats in Hong Kong because those tend to be the very, very wealthy people who can pay multi-million-dollar down payments. And if they are being impacted, it shows that the stresses on the economy and on the property market in Hong Kong in particular are pretty extreme." So far Hong Kong authorities aren't admitting there's a problem with unregulated lenders. But the number of missed payments is clearly growing... According to one analyst, lenders last year had the right to foreclose on 1,000 properties And by the end of this year, that number could to rise to 15,000.