Hang Seng Bank has reported a staggering increase in bad loans tied to Hong Kong's commercial real estate sector. In 2024, these bad loans soared to 19.81 billion Hong Kong dollars, marking an 18-fold rise from 1.08 billion Hong Kong dollars in 2023. This alarming surge highlights the mounting pressure on Hong Kong's property market and raises concerns about the stability of the banking system.
The crisis in Hong Kong's local property market is central to the escalation in bad loans. The demand for property remains lukewarm, while consumption is sluggish, causing a downturn across the residential, retail, and office sectors. As a result, banks listed in Hong Kong have reported a significant increase in bad debts linked to real estate developers within the city.
Compounding the issue is the lingering effect of bad loans from mainland Chinese developers. Three years ago, an onshore market crisis began, and the banking system in Hong Kong is still grappling with its repercussions. These factors collectively place a heavy burden on the city's banking institutions, as they navigate through swelling bad debts.
The concerning rise in bad loans valued at 2.55 billion U.S. dollars is reflective of the broader challenges faced by Hong Kong's real estate market. The tepid property demand combined with economic sluggishness has contributed to this financial strain, creating a complex scenario for banks to manage.
Hong Kong's property market troubles are not only affecting real estate developers but are also weighing on the financial institutions that support them. The ongoing crisis necessitates careful monitoring and strategic interventions to stabilize both the property sector and the banking system.
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