Hong Kong’s property sector, long regarded as a pillar of the city’s economy, is now facing one of its most daunting challenges in decades. As the calendar turns toward 2026, developers and their creditors are staring down a sharp increase in debt repayment obligations, with bond maturities set to surge by nearly 70% compared to 2025. This looming wall of debt, coupled with plummeting property values and a shrinking pool of capital, is casting a long shadow over the city’s economic prospects and threatening to trigger a ripple effect across the broader financial system.
According to data compiled by LSEG and reported by Reuters, local property developers’ bond maturities will soar from US$4.2 billion in 2025 to a staggering US$7.1 billion in 2026. This spike in repayments comes at a time when the sector is already reeling from a dramatic collapse in commercial property valuations, which have tumbled more than 50% from their 2019 peaks. Analysts warn that the combination of falling sales, evaporating asset values, and tightening credit conditions could push more developers to the brink of default.
The warning signs are already flashing. Road King Holdings, a prominent city-based developer, recently became the first Hong Kong developer to default on bond coupon payments since China’s property debt crisis erupted in 2021, as reported by Devdiscourse. Earlier this year, Emperor International also suffered its first loan default, underscoring the mounting financial strain within the sector. These defaults have shattered the sense of invulnerability that once surrounded Hong Kong’s property giants and have put both investors and creditors on high alert.
“It will be at a point where there is actually no chance for them to repay such loans,” said Edward Chan, an analyst at S&P Global Ratings, in comments reported by Reuters. Chan cautioned that more small-sized developers could face default in the next 12 to 24 months, especially as banks move to reduce their loan exposure to the sector.
The property industry’s troubles are not just a concern for developers and their shareholders. Real estate and related sectors account for roughly a quarter of Hong Kong’s GDP, making the industry’s health critical to the city’s overall economic stability. The cascading impact of rising non-repayments is also weighing heavily on creditors, particularly major banks like HSBC and Hang Seng Bank, which have significant exposure to local developers.
The risks are particularly acute for some of the city’s biggest names. New World Development, one of Hong Kong’s top four developers, faces bond repayment obligations of US$168 million in 2026 and a further US$630 million in 2027. The company, which carries HK$180 billion (around US$23 billion) in borrowings, narrowly avoided default earlier this year by securing a massive US$11.2 billion debt refinancing deal in June 2025. Lai Sun Development, another major player, is on the hook for US$524 million in repayments next year. While New World Development did not respond to requests for comment and Lai Sun declined to comment, their mounting obligations highlight the precarious position of even the city’s most established developers.
The majority of Hong Kong developers’ debt comes from bank borrowings, and the pain is spreading to the lenders themselves. Hang Seng Bank, for instance, took a hefty HK$2.5 billion charge on Hong Kong commercial real estate in the first half of 2025—a 224% increase from the previous year, according to Reuters. Meanwhile, HSBC’s internal risk assessment showed that its commercial real estate loans with significant credit risk in Hong Kong tripled to US$18.1 billion by the end of June 2025. While HSBC has stressed that this classification is not an absolute indicator of credit quality, it is a clear sign of mounting stress in the sector.
Commercial real estate now accounts for about 9% of total bank lending in Hong Kong, with up to 70% of these loans secured at a loan-to-value ratio between 45% and 55%, according to S&P. The agency has forecast a rise in impaired loan ratios for the local banking sector—a warning that lenders are taking seriously. Hang Seng Bank, for its part, said the rise in expected credit losses was due to a “prudent approach amid an increase in allowances for new defaulted exposures, and other factors.”
Despite these worrying trends, some officials are urging calm. Eddie Yue, the head of Hong Kong’s de-facto central bank, insisted that the banking system remains “well-capitalised and has sufficient provisions and good financial strength to withstand market volatilities.” Yue pointed to key indicators such as capital adequacy and provision coverage ratios as evidence that the system can weather the current storm.
Yet behind the scenes, banks are quietly taking steps to limit the fallout. Market observers told Reuters that some lenders have opted not to classify defaulted loans as such or demand immediate repayment from distressed developers, fearing that a wave of forced asset sales could further depress property values and trigger a domino effect across the sector. “Now banks are actively deciding not to recall these loans too much—they want to buy time for a market recovery,” said Joseph Tsang, chair of JLL Hong Kong. Tsang warned that curtailing lending to developers could stifle economic activity across the board, compounding the city’s woes.
For many developers, the options are narrowing. The challenge of selling office and retail assets to raise cash has become acute, with commercial property valuations in freefall and no recovery in sight. Analysts say that more fire sales would only exacerbate the situation, driving prices even lower and putting additional pressure on both struggling and cash-rich developers alike.
The broader implications for Hong Kong’s economy are hard to ignore. With the property sector accounting for such a significant share of GDP, the risk of a prolonged downturn threatens to sap confidence, slow growth, and undermine financial stability. The exposure of major banks like HSBC and Hang Seng Bank adds another layer of complexity, as any significant deterioration in asset quality could reverberate through the financial system.
Looking ahead, the next 12 to 24 months will be critical. Analysts and market participants will be watching closely to see whether developers can navigate the treacherous waters of rising debt and falling asset values, or whether the sector’s troubles will deepen, pulling the broader economy down with it. One thing is certain: the days of easy money and ever-rising property prices in Hong Kong are over, at least for now.
As the city’s developers, banks, and policymakers grapple with these unprecedented challenges, the fate of Hong Kong’s once-mighty property sector hangs in the balance. The coming year could prove decisive—for better or for worse.
