Hong Kong Property Outlook: Moody's Warns of Financial Struggles for Key Developers
The Current State of Hong Kong Property
According to Moody's, major Hong Kong developers are likely to face earnings challenges this year and next, with an expected decrease of 5 per cent in earnings before interest, taxes, depreciation, and amortisation (EBITDA) for 2024. This follows a 7 per cent fall in 2023, impacting key players like Sun Hung Kai Properties (SHKP) and CK Asset Holdings.
Commercial Market Trends
The commercial sector, particularly offices and retail, is under increasing pressure. With another 3 million sq ft of new office space, including SHKP's International Gateway Centre in Tsim Sha Tsui, vacancy rates are expected to rise. The office sector is projected to see rental income decrease by 5 to 10 per cent in the next year due to this oversupply.
Challenges Facing Retail
- Retail sales have decreased 7.7 per cent this year, reflecting low tourist expenditure.
- Projected declines in retail rental income suggest a squeeze on profitability for landlords.
- Expectations of 10 per cent decline in retail sales this year increase concerns for retail developers.
Residential Market Adjustments
- Residential property prices are forecasted to slip by 5 to 10 per cent this year as developers face inventory challenges.
- Potential for stabilization is seen in the first half of 2025 due to easing mortgage rules.
- Investment demand may rise as rental yields become more appealing.
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.