Default shocks could derail property recovery, warns S&P

Hong Kong's residential property market is facing the threat of default shocks that could derail its recovery, S&P Global Ratings says.

The agency warned that any high-profile defaults or restructurings by a major developer would squeeze industry funding, with effects rippling through the sector, hurting even highly rated names.

It noted that speculation around credit pressures on a number of local developers is building in the Hong Kong market.

New World Development’s (0017) finances remains a key concern.

Last month, NWD issued announcements addressing “rumors and speculations in relation to the group's operations as well as its financial indebtedness” and stated that it was carrying out its businesses as usual and that it had refinanced about HK$17.8 billion of bank loans since July 2024.

“We believe a high-profile default by a major developer would hit market confidence. Prospective homebuyers may delay purchases,” said Wilson Ling, an S&P Global Ratings analyst.

“Under this scenario, sales of primary residences in 2025 would fall to about half of the agency’s base-case forecast of 20,000 units, and home prices could fall 5 percent to 7 percent.”

JUNE CHEN