Distressed sales to attract investor attention in Hong Kong next year

Unsold luxury residential units are expected to be the key focus.

With the accumulation of unsold inventories across sectors, the overall real estate capital market in Hong Kong has been slow in 2024 thus far.

According to Antonio Wu, Knight Frank Head of Capital Markets, Greater China, from January to November 2024, a total of HK$34.6 billion in transactions (property values of HK$100 million or above) were recorded, representing a 58% decline compared to the previous year. He added that financing costs and insufficient yield expansion remain key concerns for investors.

Here’s more from Knight Frank:

In terms of property types, the office sector accounted for 37% of market activity and is expected to continue performing well, driven by end-users due to the greater availability of discounted and distressed assets. Notable transactions include the acquisition of Cheung Kei Center, Hong Kong Li-Ning Building (Formerly Harbour East) and DBS Bank buying 2 floors in The Center. 

The retail sector followed at 27%, as retail pricing further adjusted in terms of yield and unit price, while development sites accounted for 13%. Hotel and serviced apartment investments made up 7% of transactions, with investment in student housing conversions showing improvement.

Looking ahead to 2025, we expect the capital market to focus on unsold luxury residential units due to the relaxed New Capital Investment Entrant Scheme. Distressed sales will attract attention as investors take a cautious approach until interest rates stabilise. End-user investment sentiment is expected to improve with anticipated interest rate cuts, despite ongoing geopolitical tensions. En-bloc hotel and residential investments will remain strong, while the private mass residential rental index is projected to rise.