A couple of weeks after the Hong Kong Monetary Authority shared that negative equity cases in Hong Kong’s real estate market had climbed to a new high, mid-May saw a flurry of widely reported sales driven by a drop in interest rates.

According to HKMA estimates, the number of residential mortgage loans in negative equity stood at 40,741 at the end of March — reportedly the highest on record since the fourth quarter of 2003. As the number of properties saw their value drop below what the owners owed in home loans, the value of such loans in negative equity increased to HK$205.9 billion ($26.33 billion) at the end of March. It was HK$195.1 billion at the end of December.

Beyond the staggering statistics, why negative equity weighs so heavily is summed up by this HKMA note from June 2002: “They are an issue of continuing concern: to the community, because of the financial burden that many in such an unfortunate situation have to carry; to the banks, because of possible adverse effects on asset quality; and to the HKMA as banking supervisor, because of the associated risks to banking stability.”

But beyond formalese, for the average homeowner, negative equity can shake the core of familial stability just like unemployment or critical illness. For the average homeowner residing at their only address purchased after years of saving for the down payment in one of the world’s most inaccessible housing markets, the only consolation is steady occupancy as long as they can afford mortgage payments. The psychological solace of that is supreme and indisputable and can be a beacon of stability in times of economic uncertainty.

Often, the economics of home ownership takes a reductionist view of the individual homeowner and the dreams and despondencies of family units residing in each home. And perhaps the latent bias against speculators spills over to bracket single-home owners in a way that they too are unfairly deemed privileged in a market the average resident is priced out of.

Housing is a basic necessity, just like education, health care and employment. Speculation is not. Home ownership reinforces the adult experience of being an economically active member of the community. According to a report of the Organization for Economic Cooperation and Development quoted in a March 2021 research brief prepared by Hong Kong’s Legislative Council, “Places with a higher home ownership ratio tend to have more equal wealth distribution than those with a lower ratio, as home assets are the most common form of assets held by citizens.”

The recent uptick in home sales is as such more than welcome, even though speculators may have been swooping in. By the first week of May, the HKMA had intervened a number of times to stop the Hong Kong dollar’s robust rise so that it may not break its peg to the US dollar, which continued sliding. It was the first time since 2020 that the HKMA had intervened to stem the gains of the Hong Kong dollar that is pegged to a band of between 7.75 and 7.85 versus the US dollar. With the HKMA’s copious offloading of the local currency, its abundant liquidity pushed down borrowing costs. Bloomberg reports, “The one-month Hong Kong Interbank Offered Rate, which often serves as a reference rate for mortgages, dipped below 1.3 percent, the lowest since August 2022.”

The plunge came despite the US Federal Reserve’s choosing not to cut interest rates earlier this month. With the US dollar peg, a rate cut usually makes Hong Kong mortgage payers happy as the HKMA keeps pace.

This time, a high demand for the Hong Kong dollar is responsible for the good tidings. HKMA Chief Executive Eddie Yue Wai-man said at a meeting of the Legislative Council’s Panel on Financial Affairs earlier this month that going forward, a high demand could make the Hong Kong dollar bullish. According to news reports, Yue listed several factors for the appreciation, including upcoming IPOs and stock dividends.

Certainly, Hong Kong is looking at a slew of listings in the coming months, and late April, Hong Kong Exchanges and Clearing Ltd reported net income of HK$4.08 billion in the three months ending March 31 — a year-on-year growth of 37 percent.

Last week, government data revealed Hong Kong’s economy posted a year-on-year expansion of 3.1 percent in the first quarter of 2025. This was attributed to an increase in exports of goods and services, and expanding overall investment expenditures. Hong Kong’s real GDP growth forecast for 2025 is expected at 2 to 3 percent, in line with Financial Secretary Paul Chan Mo-po’s 2025-26 Budget forecast in February.

As widely reported, Hong Kong’s home prices have tumbled nearly 30 percent from their 2021 peak. The lower borrowing costs may or may not have indicated a turning of the corner for Hong Kong’s property market. The tumbling US dollar may or may not have a lasting effect. But one thing is clear: In a fickle market, nothing can beat strong fundamentals.

The author, who was born in Kolkata, India, is an award-winning Hong Kong-based journalist, current affairs commentator and English fiction writer.

The views do not necessarily reflect those of China Daily.