In the Year of the Snake, Hong Kong’s property market could see unusual commercial transactions as traditional investors stay on the sidelines while educational and church organisations scoop up assets, according to analysts and deal-makers.
Commercial property transactions in the city declined by more than 11 per cent to 3,461 in 2024 from 3,906 in 2023, according to data tracked by property agency Midland Realty.
The value of commercial deals fell by 46 per cent year on year to HK$20.1 billion (US$2.6 billion), according to Savills, which tallied non-residential transactions where the buyer acquired at least 30 per cent ownership of the asset.
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Only “cash-rich buyers” were able to make deals happen last year, the property consultancy said.
Among commercial transactions of HK$50 million or more, the proportion attributed to non-profit organisations, including educational institutions and religious groups, rose markedly to 14.2 per cent in 2024 from 2.8 per cent in 2023, according to JLL.
In notable deals last year, Christian church Island ECC paid HK$750 million for several floors of Kiu Fai Mansion in North Point, which houses the Sunbeam Theatre famous for its Cantonese opera performances. Hong Kong Metropolitan University paid HK$2.6 billion for the 15-storey One HarbourGate East Tower, a premium office building in Hung Hom seized by creditors from cash-strapped Chinese tycoon Chen Hongtian of Cheung Kei Group.
“From the client inquiries we received, we expect that this trend will continue,” said Eugene Wong, partner at law firm Johnson Stokes & Master (JSM). “This is largely because purchasers such as universities, educational institutions, churches, certain traditional [ultra-high-net-worth individuals], wealthy families and other end users are less affected by the slowdown in the economy.”
These buyers tend to hold relevant assets on a long-term basis and have probably determined that property prices in Hong Kong have corrected sufficiently, Wong said.
Hong Kong Metropolitan University bought One HarbourGate East Tower in Hung Hom for HK$2.6 billion in November. Photo: Handout alt=Hong Kong Metropolitan University bought One HarbourGate East Tower in Hung Hom for HK$2.6 billion in November. Photo: Handout>
“They are comparatively cash-rich, and can often complete acquisitions with their own resources,” he said. “In other words, they are also less affected by a high-interest-rate environment and any difficulty in obtaining bank financing.”
Funds and wealthy investors from Southeast Asia and the Middle East could also be active in the local property scene this year, Wong said.
The Hong Kong government has been actively strengthening ties with countries in these regions amid heightening geopolitical tensions between Beijing and the West.
For example, Hong Kong’s stock exchange plans to open an office in Riyadh, the capital of Saudi Arabia, adding to its locations in New York, London, Beijing and Singapore. In Southeast Asia, efforts have included a visit by Chief Executive John Lee Ka-chiu and a delegation of Hong Kong officials to Vietnam, Laos and Cambodia last summer to promote economic and trade cooperation.
As for traditional investors, prevailing market conditions and uncertainty over interest rates are hobbling their investment plans, said Jasmine Chiu, partner at JSM.
“Regional investors will keep looking for distressed-buyout or receivership-sale opportunities at a low price for the want of capital gains in the medium to long term,” she said. “This would involve buying high-end residential houses from distressed individual borrowers and offices for end users. Distressed-buyout investors tend to seize down-cycle opportunities and acquire assets at a haircut from mortgagee banks.”
In 2024, the cumulative value of distressed-property transactions in Hong Kong hit HK$15 billion, according to JLL. In the last three months of 2024, investors focused on assets that were under receivership or being sold at a loss, and such deals accounted for nearly half of the big-ticket transactions in Hong Kong, according to data tracked by Colliers. The trend is likely to continue, they added.
“These trends are expected to persist into 2025, as borrowing costs remain elevated and the correction in commercial property prices continues, potentially with more distressed properties coming up in the market,” said Cathie Chung, senior director of research at JLL. “End users remain relatively insulated from the investment-market uncertainties, as their property-acquisition priorities focus primarily on location and operational suitability rather than rental yield, in addition to their relatively adequate cash flow generated from business operations.”
With more attractive property assets on sale in Hong Kong, investors from Southeast Asia and the Middle East could be enticed to make moves, Chung said.
“We anticipate an increasing participation from Southeast Asian investors, who know the Hong Kong market landscape well, leveraging this opportunity to diversify their investment portfolios in Hong Kong,” she said.
