Household debt to GDP ratio jumps to record-high at 62%

Blame it on mortgage growth.

According to Barclays, in Hong Kong, household debt to GDP was at 62% in 2013, a record high.

In the event that the economy (i.e. GDP growth) slows, this ratio will surge further, similar to what happened after the Asian financial crisis when the ratio rose from 48.3% in December 1997 to 59.6% in December 2002, as a result of GDP declines.

Here’s more from Barclays:

Low interest rates and abundant liquidity conditions in Hong Kong and Singapore have fuelled rapid growth in household debt (8%+), far in excess of GDP growth (~5%).

Household debt to GDP surged to 75% in Singapore and 62% in Hong Kong in 2013 from 63% and 50% before the global financial crisis in 2008.

A large part of the rise in household debt was driven by the property market, but growth in mortgage financing has moderated after six/seven rounds of countercyclical measures introduced by the HKMA and MAS, including special stamp duty, limits on loan to value ratios, and more restrictive rules for property speculators and investors.

The rise in household debt is mainly attributed to mortgage growth. The mortgage to GDP ratio reached 45% and 56% in Hong Kong and Singapore, respectively, in 2013. The ratio had stabilised in Hong Kong since late 2010 and in Singapore since 2012, after the introduction of government property market cooling measures in both markets.