Hong Kong real estate investments plummet 47% to HK$9.9b in H1 2024

Find out more about some key transactions that took place during the period.

According to a Savills report, the Hong Kong en-bloc investment market was still facing some headwinds over the first few months of 2024. The total value of major property transactions stood at HK$9.9 billion in 1H/2024, representing a significant decline of 47% compared to the first half of 2023. 

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Despite that, some notable en-bloc transactions took place in Q2 2024, including the sale of a brand-new hotel in Hung Hom for HK$1 billion to the Hong Kong Metropolitan University. The transaction of a 255-room hotel was aimed at providing comfortable, conveniently located accommodation for its students. This transaction highlights the demand from cash-rich end users driving the market.

The office sector was dominated by distressed sales. For instance, 88WL, a newly developed commercial property in Sheung Wan, originally acquired and developed by Kai Long / Goldman Sachs for a reported amount of HK$1.6 billion, was subsequently sold to a local investor for only HK$700 million. Vendors incurred significant losses and banks involved just recoupled their loans to facilitate the deal. The low unit price was a key incentive in the buyer's decision, in addition to the expected yield of approximately 5% when fully leased. 

Other notable discounted sales included two entire floors of the Bank of America Tower, selling for HK$18,732 and HK$18,012 per sq ft respectively, marking almost 60% decline from the highest unit price achieved in the building. Additionally, the 29th floor of the No. 9 Queen's Road Central (QRC) commercial building was acquired for HK$22,514 per sq ft, again a more than 60% discount to the then peak prices.

In the retail sector, a significant transaction involved the retail podium and public car park at Alto Residences, which is located seven minutes from Tseung Kwan O station. Following extensive negotiations, CR Longdation, a subsidiary of China Resources Group, acquired the property for HK$540 million. The retail podium offers an attractive 6% return which could lure long-term investors even under the high interest rate environment. 

With banks’ loan quality likely to further deteriorate over the next few months, meaning they would be equally if not more cautious in terms of lending attitude, coupled with high refinancing costs, pushing more large property portfolio owners to liquidate some of their fringe assets possibly at discounts, we may see more discounted / distressed sales in the commercial real estate market in the second half of 2024, with genuine cash-rich buyers the major beneficiaries to continue bargain hunting.