It's a great time to buy a Hong Kong mansion from the cash-strapped elite
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- Some distressed, wealthy homeowners in Hong Kong are selling their exorbitant homes at a discount.
- Hong Kong's property market has been under pressure due to high interest rates.
- The removal of property curbs in Hong Kong has boosted luxury home sales.
Hong Kong once held the record for the priciest home sold in all of Asia. But some owners of the island's most luxurious houses have been selling them at a loss this year.
Driven by high interest rates and macroeconomic stress, some homeowners, or their lenders, are offloading prime real estate at substantial losses to repay mounting debts. That's presenting a rare window for real estate buyers to sweep up these homes at discounted prices.
Some high-end properties sold in the first half of the year for up to 50% off 2018's peak prices, said Jack Tong, the Hong Kong director of research at real estate services company Savills.
Most of these new homebuyers came from cash-rich families or industrialists who had the liquidity to buy quickly, Tong told Business Insider.
"The lack of ultra-high-net-worth mainland tycoons due to slower China economic growth and stricter capital outflow restrictions meant no more record-breaking prices registered for the sake of trophy assets as in the pre-COVID period," Tong said.
One such prominent family, that of Ho Shung Pun, director of real estate investment firm Kowloon Investment Company, sold seven luxury homes at considerable discounts, Bloomberg reported on Monday. The company did not respond to BI's request for comment.
The Hos aren't the only family — or lenders to a family — selling.
In the first half of the year, around 75% of properties valued over $10 million involved cash-strapped sellers, according to data from CBRE Group cited by Bloomberg.
Hong Kong's property bubble has experienced sharp cyclical fluctuations. In the late 1990s, the city saw a significant recovery after a drop in residential prices from the Asian financial crisis in 1997.
This time, however, Hong Kong might not see a rebound of such spectacular proportions, as high interest rates are hampering the market, UBS analyst Mark Leung told the Financial Times in May.
Soaring interest rates in the US have pressured Hong Kong's property market due to its currency peg to the US dollar. The cost of borrowing in Hong Kong has risen above its 3% average rental yield, Reeves Yan, head of capital markets at CBRE Hong Kong, told Bloomberg.
Despite these challenges, Hong Kong remains a top Asia market for high-end property transactions, outpacing regional competitors like Singapore.
The removal of property curbs earlier this year spurred a recovery in luxury sales. In the first half of the year, 23 properties were purchased at more than 200 million Hong Kong dollars, or $25.6 million — 53% year-over-year growth, according to data from Savills.