Employment, not prices, to weigh on Hong Kong banks’ loans

Banks will face ‘minor but manageable’ pressure on such portfolios.

It’s employment, not residential prices, that will weigh on Hong Kong banks’ loan portfolios over the next two years.

History shows sharp falls in economic growth or jumps in unemployment rates are bigger factors for credit performance on Hong Kong residential mortgage loans, S&P Global Ratings said in a January 2025 report.

“We expect the city's banks will face minor but manageable pressure on such portfolios in the next two years,” the ratings agency said.

The hit to Hong Kong residential prices over the past few years won't knock on to banks.

Property sales in the city rose 17.1% year-on-year (YoY) in 2024, according to the Land Registry.

Home sales in particular are expected to see a boost in 2025, amidst an expected demand from mainland Chinese living in Hong Kong, new measures introduced by the government to support young homebuyers, and recent enhancements in the New Capital Investment Entrant Scheme. 

The latter may help attract more high-net-worth individuals (HNWI) to the city, boosting luxury residential property market transactions.

Whilst a July 2024 report by CBRE Hong Kong estimated that residential property prices may fall by up to 10% for the whole of 2024, a separate report by Knight Frank expects home prices to rise by 5% for 2025.