CEO of HKMA Highlights Rising Bad Debts and their Impact on Hong Kong's Commercial Real Estate Market
Concerns Over Bad Debts in Hong Kong's Commercial Real Estate
The CEO of HKMA, Eddie Yue Wai-man, recently addressed the rising bad debts affecting Hong Kong's commercial real estate market due to the ongoing interest rate environment and the aftereffects of COVID-19. Although the bad-debt ratio in the banking sector has climbed to 1.89%, from 1.5%, Yue reassured that the overall system remains robust.
Impact of the COVID-19 Pandemic
- The three-year-long COVID pandemic hit various business sectors, particularly office vacancies.
- Vacancy rates for grade A offices surged to 14% in June, the highest since 2004.
- Global financial institutions have downsized due to sustained business lulls.
Outlook for Commercial Real Estate
- Retail valuations have plummeted by around 40% from recent highs.
- The bad-debt ratio is expected to rise to 2%, aligning with long-term averages.
- Despite concerns, most banks hold substantial collateral against potential defaults.
With a rate cut cycle in progress, the credit landscape may improve for developers, promising lower funding costs.
The capital adequacy ratio in Hong Kong's banking sector remains strong at 21.1%, exceeding international standards, highlighting ongoing resilience amidst challenging circumstances.
This article was prepared using information from open sources in accordance with the principles of Ethical Policy. The editorial team is not responsible for absolute accuracy, as it relies on data from the sources referenced.