Rising household debt imperils Hong Kong

Another problem on top of an overheated property market.

Norman Chan, Chief Executive of the Hong Kong Monetary Authority, said household deb tin the city is approaching dangerous levels.

He warned that debt is “. . . near historic high levels,” and revealed that the debt to GDP ratio during the third and fourth quarters stood at 58% and 59%, respectively.

Household debt in Hong Kong almost doubled to HK$1.21 trillion in 2012 from HK$662.8 billion in 1997 when the housing bubble in the city burst, said HKMA. Household mortgage loans jumped 64% to HK$888.9 billion during the period, while credit card and personal loans surged almost three times to HK$320.1 billion.

Chan said household debt levels might rise further when a downturn occurs if one believes that the housing market and the economy run in cycles. A housing market burdened by a lingering economic slowdown makes debt repayment difficult.