The Government said today that it disagrees with an observation made in a report by S&P that there is an oversupply of residential properties in Hong Kong.

In a statement responding to media enquiries on the S&P report issued yesterday on Hong Kong’s banks and property market, the Government pointed out that housing demand is currently keen, as the vacancy rate of private flats was 4.5% at end-2024, on par with the long-term average of the previous 20 years, while flat rentals sustained a solid increase.

The Government said the residential property market should see stable development this year, as the city benefits from the general downtrend in interest rates, continued economic growth and talent arriving in Hong Kong.

It also reiterated that it will continue to closely monitor market developments and strive to maintain the steady development of the residential property market in a prudent and pragmatic manner.

Notwithstanding the uncertainties in the global macroeconomic environment, the banking sector’s credit quality and risks remain manageable, the Government stressed.

Property lending for the Hong Kong banking system amounted to $3.4 trillion at the end of last year, accounting for about one-third of the total loans. Among property-related lending, 56% were residential mortgage loans, while 44% were loans for local property development and investment.

Observing the fact that the overall delinquency ratio of residential mortgage loans was only 0.12% as of end-January 2025, while the delinquency ratio of residential mortgage loans in negative equity remained stable at 0.15% as of end-2024, the Government remarked that the vast majority of mortgage borrowers are able to repay their loans on time. Moreover, under the Monetary Authority’s countercyclical macroprudential measures, Hong Kong’s property market has remained stable, with an average loan-to-value ratio of 60% and a low debt-servicing ratio of around 40%.

Following the US Federal Reserve’s interest rate cuts, major banks in Hong Kong have lowered their best lending rates by a total of 0.625% over the past year, resulting in lower mortgage rates. Residential property prices in Hong Kong have shown signs of stabilising in recent months.

The report by S&P yesterday also expects Hong Kong's property prices to stabilise in 2025, the Government noted.

Separately, for local property development and investment loans, the Government said it agrees with S&P’s view that Hong Kong banks are able to manage the strains arising from the commercial real estate sector.

As for the small and medium-sized banks mentioned in S&P’s report, the Government said those banks have been taking appropriate credit risk mitigation measures, such as collateralisation, in accordance with the Monetary Authority’s guidelines. Banks in Hong Kong also have strong capital positions and good profitability to withstand the extreme scenario of large volatility in property prices.