Challenges from commercial property credit quality will persist for Hong Kong banks next year, though these may be balanced by prospects in capital markets and yuan business, according to the head of the city’s de facto central bank.

“The Hong Kong Monetary Authority will continue to monitor the credit quality of the property sector, which will continue to be a challenge for the banking sector next year,” said chief executive Eddie Yue Wai-man in an exclusive interview.

However, there was no need to be too worried, he added.

Hong Kong’s lived-in home prices recorded a modest gain for the fifth straight month, rising 0.14 per cent in August and narrowing this year’s price decline to 0.24 per cent, according to the Rating and Valuation Department.

Yue said the data showed the residential market was stabilising, so the focus was on commercial property.

“Although the banking sector faces pressure from commercial real estate credit quality, this sector represents only a small portion of its lending, and banks have made sufficient provisions,” he said. “The risks are manageable.”