Hong Kong’s commercial real estate sector has put its worst behind it and poses limited risk to the banking system, DBS Bank (Hong Kong) chief executive Sebastian Paredes said on Thursday.

But the market is expected to take several years to fully recover, with the pace of rebound tied to mainland China’s economic and property market stabilisation, which would help revive demand for offices, retail, and consumer spending, Paredes said at the Financial Times Banking Summit Asia 2025.

The city’s retail property market is showing early signs of stabilisation, he added, but the office sector continues to face pressure in the near term.

As the market gradually absorbs office supply and prices and rents adjust downward, the sector is approaching a bottom, Paredes said.

He also noted that Hong Kong’s financial sector remains robust, and the impact of the property market on banks is limited.

Banks' exposure to commercial real estate is manageable and not overly concentrated, Hong Kong Monetary Authority Deputy Chief Executive Arthur Yuen Kwok-hang said at the summit.

Classified loan ratios are below 2 percent, around the long-term average, while the loan loss provision coverage ratio stands at 150 percent, Yuen added.

However, the banking industry is dealing with additional challenges from the interest rate gap between the US dollar and the yuan, which has negatively affected around 15 percent of corporate lending, Paredes highlighted.

Hong Kong’s commercial property slump past worst, limited impact on banks, DBS CEO says