By the end of June this year, the number of residential mortgage loans in negative equity had reached 106,000, representing a total value of HK$165 billion (the unsecured portion of which stood at HK$36 billion). This represents a significant increase on the previous quarter's figures which showed the number of RMLs in negative equity totalling about 83,000, with a total value of HK$135 billion.

"The sharp rise in the number and amount of mortgage loans in negative equity in the second quarter is not surprising since it reflects the downward shift in property prices which was aggravated by the SARS outbreak," Mr David Carse, Deputy Chief Executive of the HKMA, explained, continuing: "It is encouraging that the ratio of delinquent negative equity loans has declined. Nevertheless, the situation is one which requires close attention by authorized institutions."

Illustrating just how far the property market has slumped in the city in the last few years, the New York Times on Thursday cited the example of a salesman who bought an apartment for $186,000 in 1993. By 1997, the property had climbed to $218,000 in value, but this has since slumped to $70,000.

Falling property prices have weighed heavily on Hong Kong's economy during the last 4 years, alongside consumer price index declines of some 15% overall.