Hong Kong property sector clouded by rising debt repayment risks

Hong Kong's debt-laden developers and their creditors are set to face intensifying financial pressure as bond maturities are slated to jump by nearly 70% next year amid falling sales and valuations for the city's economically crucial property sector.

Road King last week became the first city-based developer to default on bond coupons since China's property debt crisis began in 2021, following the first loan default by listed peer Emperor International earlier this year.

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Slim prospects for a revival in the commercial property sector in the near term and fewer sources of raising fresh capital mean more developers would struggle to meet repayment obligations in Hong Kong, analysts said.

Property and its related sectors account for roughly a quarter of Hong Kong's GDP, and the industry's rising non-repayments will not only weigh on its economic prospects but also cast a cloud over creditors, including HSBC, with sizeable exposure to developers in the Asian financial hub.

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Developers, which hold mainly office and retail assets, are under huge pressure due to the challenge to sell assets to raise cash in those two segments that have seen valuations drop more than 50% from 2019 peaks and with no recovery in sight, he said.

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The majority of Hong Kong developers' debt comes from bank borrowings.

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