A major developer default could delay Hong Kong's home price stabilization and negatively impact even highly rated developers, S&P Global Ratings said in a Thursday release.
Speculation regarding credit constraints among Hong Kong developers has been growing, with major player New World Development (HKG:0017) recently issuing notices to clear up the rumors.
Under a major developer stress scenario, primary residential sales in 2025 could plummet to half the projected 20,000 units, with home prices falling between 5% and 7%, S&P said.
A major default could freeze market confidence, with potential buyers postponing purchases and shareholders withdrawing support.
Developers would see squeezed margins, leading to increased debt leverage, according to the rating agency.
S&P said rated developers have strong liquidity, but some unrated ones face tighter funding.
Hong Kong's property market stabilization depends on easing mortgage rates that are linked to US rates, with delays in the latter adversely impacting the domestic market.
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