As Hong Kong's luxury property market faces mounting pressures from high interest rates and declining valuations, wealthy owners are increasingly resorting to fire sales, offloading their properties at significant losses. Notably, tycoon Chen Changwei of Hengli Investments has listed his penthouse in Opus Hong Kong for sale, which he originally purchased for HK$509 million (US$65.3 million) in 2015. Additionally, Chen's ground floor shops at Pearl City Mansion, bought for HK$1.1 billion in 2021, are also on the market [2ae7d46a].
The trend is alarming, with 75% of luxury transactions exceeding US$10 million in the first half of 2024 involving financially stressed sellers [2ae7d46a]. Property values in Hong Kong have plummeted nearly 30% since their peak in 2021, leading to significant losses for sellers. For instance, a unit owned by Chen Hongtian sold for HK$418 million in September 2023, which was 39% below market value [2ae7d46a].
In addition to individual sales, major firms like Gaw Capital and Hengli are attempting to sell two office buildings that were acquired for HK$15 billion, reflecting the broader distress in the market [2ae7d46a]. The situation is exacerbated by banks reducing property development loans, with total loans now at their lowest since 2020 [2ae7d46a].
While the Federal Reserve recently cut rates by 0.5%, leading the Hong Kong Monetary Authority to follow suit with a base rate of 5.25%, experts predict that these measures may not provide sufficient relief to the luxury market [2ae7d46a]. The overall sentiment remains cautious, as buyers are becoming increasingly selective amidst ongoing financial challenges, with private credit in the Asia-Pacific region reaching US$99.3 billion in 2023 [2ae7d46a].
This scenario mirrors the struggles seen in mainland China, where home prices have also been on a downward trajectory, with a 5.7% decline reported in August 2024 across major cities [379801b4]. As both markets grapple with economic uncertainties, the strategies employed by developers and sellers reflect a broader trend of seeking innovative solutions to attract buyers and stimulate demand [8acdec0f].