Hong Kong developer’s default could send shock waves through property market: S&P

‘Hong Kong’s residential property recovery may be slipping out of view,’ credit-rating agency says

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A man passes a property agency in Mong Kok. Photo: Elson Li

Published: 6:00pm, 6 Feb 2025Updated: 7:08pm, 6 Feb 2025

The default of a major Hong Kong property developer could send shock waves through the broader sector and scuttle a potential recovery in the residential market, according to S&P Global Ratings.

“Hong Kong’s residential property recovery may be slipping out of view,” the credit-rating agency said in a report on Thursday. “S&P Global Ratings believes that any distress event involving major Hong Kong developers could trigger cascading effects, hitting the financial strength of rated entities [while] raising the risk [to] bondholders.”

If such a scenario were to play out, the 2025 forecast for new home sales was likely to reach 10,000 units, which is half of what S&P predicted in November. In addition, home prices are likely to fall 5 to 7 per cent, worse than a previous estimate from last year.

Hong Kong’s property market, despite some improvement last year, was still struggling with a glut of new homes and slower-than-expected sales, according to Centaline Property Agency.

In 2024, 24,261 new homes were built, a 75 per cent increase from 2023 and a 20-year high, said Yeung Ming-yee, a senior associate director at Centaline. But developers were only able to sell about half of these new units, far lower than the 80 per cent sell-through rate recorded from 2014 to 2021.

“The backlog of existing properties has not improved,” Yeung said. “It will take time for completed units to be disposed of. The proportion of first-hand sales will remain low in the short term.”

Market participants have speculated about the likelihood of a default by debt-laden New World Development (NWD), but the firm has been assuring the market that it is not in discussions with creditors about restructuring its obligations. NWD did not respond to a request from the Post for comment.