By South China Morning Post | Created at 2024-09-30 02:37:30 | Updated at 2024-09-30 05:21:37
3 hours ago
The Hong Kong Monetary Authority (HKMA) is monitoring an increase in bad debts in the city’s commercial real estate sector, but the authority’s top boss believes the banking system is robust enough to handle the situation without distress.
“It is a concern, but not alarming as the situation is still manageable,” HKMA CEO Eddie Yue Wai-man said in an interview last week.
The total bad-debt ratio in the local banking sector increased to 1.89 per cent in June, up from about 1.5 per cent at the end of last year. This is mainly due to a rise in defaulted loans in the commercial real estate sector, including in mainland China, Yue said.
“The three-year-long Covid pandemic hit many business sectors hard, while many companies are still allowing employees to work from home,” he said. “This has led to a decrease in demand in the office areas. The high interest rate environment since 2022 also burdened many developers, particularly smaller players.”
The vacancy rate for grade A office buildings soared to 14 per cent in June, the highest point since 2004, according to CBRE. Waves of global banks, law firms and multinational corporations have downsized their local operations and cut costs amid a lull in business that persisted even after the Covid-19 pandemic.
The retail sector is in even worse shape, with valuations plummeting about 40 per cent from recent highs, according to MSCI.
