Hong Kong Home Prices to Stabilize But Property Sector Woes Abound, S&P Says

Hong Kong's strained property prices may stabilize in 2025 following a significant downturn, S&P Global Ratings said in a Monday release.

The rating agency said home prices could level off after plummeting nearly 30% since their peak in 2021.

However, Hong Kong's property developers still face a challenging environment, with inventory levels remaining high and the threat of declining margins looming, S&P credit analyst Edward Chan said.

As a result, developers will likely prioritize restocking over new acquisitions in the coming years.

The rating agency expects residential sales volume to rise to 20,000 units in 2025, driven by lower mortgage rates and government market support.

However, the market remains oversupplied with 21,000 completed units in inventory as of September, S&P said.

New supply over the coming years may also exceed 80% of the government's 10-year target for private home supply, the rating agency said.

Developers will likely accept lower profit margins amid the oversupply concerns, with S&P estimating a decline in developers' weighted average EBITDA margin to 34.9% by fiscal year 2026.

S&P also expects developers to be more cautious with land acquisitions to mitigate financial risks and maintain leverage, credit analyst Wilson Ling said.