Hong Kong’s taxi trade has warned that 10 per cent of the city’s cab owners could soon default on vehicle mortgages as licence values have plunged, with many drivers switching to the new ride-hailing regime under which 10,000 permits will be issued.

The market value of a taxi licence has fallen over the past two decades, from a historic high of HK$7.66 million in 2009 to HK$2.62 million (US$334,360) for urban or red cabs and HK$1.45 million for green or New Territories taxis as of May this year, according to the Hong Kong Taxi Exchange.

Licence values hit a record low of HK$1.99 million for red cabs and HK$1.25 million for green taxis in July last year, as the government moved towards introducing the regulatory regime for ride-hailing services.

Chau Kwok-keung, chairman of the Hong Kong Taxi and Public Light Bus Association, estimated that about 1,800 out of the city’s 18,163 cabs would soon be repossessed by banks as owners fail to meet mortgage payments.

He sounded the warning after authorities decided to set a cap of 10,000 vehicles for ride-hailing permits on Tuesday, marking a major step in their long-running effort to establish a regulatory framework for the service.

Chau said that taxi licence values had fallen greatly over the years and now that ride-hailing firms could roll out 10,000 service permits, more drivers might switch to working full time.