Just over five years ago, residential and commercial real estate prices and rents were hitting record highs. Developers reported robust earnings and had access to cheap financing, boosting their confidence – and that of investors – to spend more on new projects or acquire existing income-generating properties.
But this golden era ended abruptly. Social unrest in 2019 and the Covid-19 pandemic that followed triggered an economic recession, reducing demand for commercial property at a time when new projects were being launched. The downturn also coincided with a sharp rise in Hong Kong’s interest rates, which were raised 11 times between March 2022 and July 2023 to over 5 per cent from 0.5 per cent, before falling slightly last year.
Emperor’s full-year loss of HK$4.74 billion (US$600 million) for the year ended March 2025, more than double the HK$2.04 billion a year earlier, reveals the severity of the crisis facing the sector. The group, controlled by 82-year-old tycoon Albert Yeung Sau-shing, disclosed that bank borrowings totalling HK$16.6 billion were overdue and some associated loan covenants had been breached.
“The broad issues faced by Hong Kong developers in the current environment would be weak property valuation and soft earnings from poor sales,” said Xavier Lee, an equity analyst at Morningstar. Lee did not specifically comment on Emperor’s predicament, but gave a general overview of the challenges developers face in the current environment.
