Houses on The Peak, Hong Kong’s most desired residential address. -- Photo: Roy Issa
HONG KONG (SCMP): Hong Kong elites lost billions in property deals in 2024, as wealthy individuals facing liquidity challenges in a high-interest rate environment and soft economy offloaded their assets at fire-sale prices.
Notable sellers included Chen Zhuolin, the chairman of distressed mainland Chinese developer Agile Group, who lost US$16 million in November.
The 62-year-old tycoon sold nine flats in Hamburg Villa on Eastbourne Road in Kowloon Tong, which were valued at a combined HK$213 million (US$27.3 million). The units were sold at discounts of between 53 and 63 per cent, less than half the original investment six years ago.
“The prices of office and retail properties have fallen 50 to 70 per cent from the peak,” said Reeves Yan, head of capital markets at CBRE Hong Kong.
The distress sales are a direct consequence of the four-year slump in mainland China’s property market that has eroded the personal fortunes of local and mainland real estate tycoons, such as Hui Ka-yan, the founder of China Evergrande Group. Other high-profile casualties include the family of Ho Shung-pun, the family of late shop king Tang Shing-bor and Cheung Kei Group’s Chen Hongtian.
Agile’s Chen was only able to recover about HK$90 million, an aggregate discount of 58 per cent, according to agents and official records. One of the Hamburg Villa flats, an 872 sq ft three-bedroom unit, fetched HK$8 million on November 1, nearly two-thirds below the purchase price of HK$21.4 million in 2018.
Like many of its peers, Agile has struggled with liquidity. In May, it failed to pay interest on a US$483 million bond maturing in 2025.
The firm had also been seeking to refinance an HK$894 million loan facility, using its project on Mount Parker Road in Quarry Bay as collateral, sources previously told the Post. That project was also put up for sale, with receivers seeking HK$3.5 billion or HK$7,800 per square foot, according to local media. Agile’s acquisition cost was about HK$3.3 billion, according to Savills.
The firm had also been seeking to refinance an HK$894 million loan facility, using its project on Mount Parker Road in Quarry Bay as collateral, sources previously told the Post. That project was also put up for sale, with receivers seeking HK$3.5 billion or HK$7,800 per square foot, according to local media. Agile’s acquisition cost was about HK$3.3 billion, according to Savills.
In November, One HarbourGate East Tower, a premium office building formerly owned by Chen Hongtian, was sold to Hong Kong Metropolitan University.
The university agreed to pay HK$2.65 billion for the 15-storey building in Hung Hom, a 41 per cent discount to the HK$4.5 billion Chen’s flagship company Cheung Kei paid in 2016.
Chen said he had lost control of the asset amid “a short-term cash-flow disruption” to his business.
Creditors also separately seized and put up for sale a 9,200 sq ft house on The Peak, which he bought for HK$2.1 billion in 2016. The house at 15 Gough Hill Road has yet to find a buyer.
Looking ahead to 2025, the outlook for the office market suggested challenges were likely to persist, said Tom Ko, executive
“More distress commercial real estate sales are expected as market conditions persist,” Ko said, adding the potential fall in interest rates might lead to increased activity, but the overall market was likely to remain under pressure amid ongoing corrections and financial constraints.
Wealthy individuals also turned to their residential assets as a last resort to inject liquidity amid a weaker outlook for office rents.
The number of distressed luxury residential assets for sale has risen in areas like The Peak, Tai Tam and Southern district, while the prices of some of these assets have fallen by at least 30 per cent from their highs, according to agents.
Savills said in September more than 100 homes on The Peak, in both the primary and secondary markets, were available, and the number of sellers with financial urgency had increased to double digits.
In May, a 5,171 sq ft mansion at 10B Black’s Link, owned by an executive of troubled developer China Evergrande Group, fetched HK$448 million, according to official data, 44 per cent less than market estimates of HK$800 million.
Meanwhile the Ho family, a low-key clan of property developers, sold four mansions on The Peak in July at a 35 per cent discount to repay debt. The units at No 46 Plantation Road went for a combined HK$1.1 billion, according to official records.
“An increase in the listings of distressed [residential] properties is possible [in 2025], as many cash-strapped homeowners continue to struggle with refinancing high-interest loans,” said Lucia Leung, director of research and consultancy at Knight Frank.
Leung also expects an increase in luxury property transactions because of the inclusion of residential property assets in the Capital Investment Entrant Scheme, better known as the investment migration scheme, and the relaxation of the loan-tovalue ratios.
However, experts also predict that the number of distressed residential property listings could increase in 2025, as many homeowners continue to struggle with high-interest loan refinancing.
The residential market overall saw a slight uptick in home prices in November, marking the second consecutive monthly increase. However, home prices had fallen by 6.55 per cent in the first 11 months of 2024, with a steep 27 per cent drop from the record high in September 2021. - South China Morning Post
