Hong Kong’s property market was once seen as a financial outlier in Asia. It was defined by scarce land, strong legal safeguards and disciplined local developers. Even as mainland China’s property groups were engulfed in a chaotic storm of defaults and debt, investor confidence in Hong Kong’s developers held, thanks to the belief that pricing dynamics and balance sheets in the city were fundamentally more resilient.

But that perception is under renewed scrutiny. Property transactions in Hong Kong fell 28 per cent in the first quarter compared with the previous year, while average home prices have declined nearly 30 per cent from their 2021 peak. Mainland capital controls and weak domestic sentiment continue to depress luxury unit sales, historically a key margin driver for the city’s developers.

Sector shares have been under pressure in recent months, especially after New World Development, one of Hong Kong’s largest property groups, deferred interest payments on several of its perpetual notes earlier this month. Fears of a potential default on a US dollar-denominated bond further weighed on markets until holders of the instruments confirmed a last-minute payment this week.