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

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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.

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.

The developer was removed from the Hang Seng Index in November and is facing financial challenges after posting a record full-year loss of HK$19.7 billion (US$2.53 billion) last year.

As of June 30, the company had HK$123.7 billion in consolidated net debt, according to its annual report. NWD’s net gearing, or debt-to-equity ratio, stood at 55 per cent, ranking among the highest in the industry. In addition, it held interest-bearing loans and bonds amounting to HK$151.6 billion.

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

Amjad Ali

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