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Salina Li

Aileen Chuang

Jiaxing Li

This story is part of a package exploring Hong Kong’s sluggish property market. See the full list here.
In the first of a two-part series, Salina Li, Aileen Chuang and Jiaxing Li explore the effects of high interest rates on the city’s tycoons and their trophy real-estate holdings.
In the rarefied air up on The Peak, the owner of the penthouse in the Opus Hong Kong development – which has been called the city’s most expensive apartment building – unexpectedly put his unit up for sale.
Some of the city’s wealthiest residents rub shoulders here. But it is rare that a unit in the 12-floor building, which twists upwards toward the clouds and was designed by the famed architect Frank Gehry – his first residential project in Asia – would come on the market for a second-hand sale.
The penthouse belongs to tycoon Chen Changwei, chairman of Hengli Investments, who developed residential and commercial projects in China and managed properties in Hong Kong, London and on the mainland.

The 5,444 sq ft unit, which changed hands for HK$509 million (US$65.3 million) in 2015, was offered with another asset that Chen wanted to offload, some ground floor shops at Pearl City Mansion in Causeway Bay. He bought them from New World Development in 2021 for HK$1.1 billion, according to people familiar with the matter.
Chen’s rush to cash out came as Hengli and Hong Kong-based private equity firm Gaw Capital sought last month to sell two grade-A office buildings in eastern Hong Kong Island that they bought five years earlier at a market peak for HK$15 billion.
Adverse conditions in the office market have touched a HK$10.3 billion loan that Gaw and Hengli took out, which was backed by the buildings. Rental income was not sufficient to cover the interest payments, so the two companies had to inject equity into the borrowing entity of the loan to cover the shortfall, people familiar with the matter said. Hengli, however, has not paid its share since late last year, the people said.
This is illustrative of a broader trend. All across Hong Kong – from The Peak to South Island and elsewhere – high-net-worth individuals have found themselves caught in a tight spot between their ritzy, overleveraged properties and a quickly draining pool of liquidity. This is because their businesses are slowing, borrowing costs are high and their financial strains are becoming more severe. Analysts say high interest rates have caused borrowing costs for developers to skyrocket as lenders raised prime rates five times – for a total of 87.5 basis points – to their highest levels since 2007.
On top of that, creditors are becoming more demanding and their terms are more rigid when it comes to repayments as property values plummet.
And those debtors who are praying that the US Federal Reserve’s wave of rate cuts will wash over them and sweep away their cash problems – with quick-fix, favourable terms on refinancings – are likely to be disappointed. This is because whatever happens in Washington, banks here are reluctant to grant new mortgages, and this year’s outlook for luxury home prices is on a downswing. As a result, the high-end fire sales are likely to continue.


“Most distressed asset owners are in an urgency to sell due to liquidity issues,” said Lucia Leung, director of research and consultancy in Greater China for Knight Frank.
Recent figures are proving that to be true. Around 75 per cent of high-end luxury transactions in the first half of this year – those worth more than US$10 million each – involved financially stressed sellers, according to data from CBRE.
The number of distressed luxury residential assets has risen, consultants say, in areas like The Peak, Tai Tam and Southern district, and prices on some of these trophies have fallen by at least 30 per cent from their highs.
Today, The Peak has over 100 homes that have come on the market for sale – both primary and secondary – and the number of sellers who report having financial urgency has risen to double digits, Savills said.
Just a year ago, Chen’s neighbour at the Opus ran into trouble. Chinese tycoon Chen Hongtian’s fifth-floor unit was sold by receivers in September 2023 for HK$418 million – 39 per cent below market prices – after he defaulted on a HK$500 million mortgage on the property. It was one of three of his assets seized by banks.
Chen Hongtian’s Cheung Kei Group owns offices, hotels and financial firms. Two of his other properties – a 9,212 sq ft house at 15 Gough Hill Road on The Peak, and One HarbourGate East Tower in Hung Hom – were also put on the market.

“The continued high interest rates have burned up property owners’ capital from the past two years, but there’s no new income coming in because the real estate market has been on a downward trend,” said Joseph Tsang, chairman of JLL Hong Kong.
He added that starting this year, Hong Kong banks have been asking borrowers to cover the differences in mortgages as property valuations fell, which resulted in more distressed assets being put on the market as liquidity-squeezed owners could not repay.
What makes things more complicated for these borrowers is that rate cuts from the US Federal Reserve are not likely to make things immediately easier.
Earlier this week, the Fed cut rates by a half-point, which was more aggressive than some analysts expected. The Hong Kong Monetary Authority (HKMA), the city’s de facto central bank, followed suit, lowering its base rate to 5.25 per cent. The moves kicked off a cycle that will reduce funding costs and help local businesses and mortgage borrowers. And the Fed has quite a bit of unwinding ahead of it: it had raised its target rate 11 times from March 2022 to July last year, in an effort to tame prices in the US.
On Thursday, HSBC Holdings, Bank of China (Hong Kong), Hang Seng Bank, Standard Chartered and Bank of East Asia (BEA) were all able to cut their prime rates by a quarter point for the first time in nearly five years. Financial Secretary Paul Chan Mo-po said the rate cut “will be positive for local businesses, and be supportive to our capital markets” as “the rate cut overnight in the US has started a new round of rate-cut cycle”.
And even in spite of another expected half-point reduction by the end of the year, industry experts expect little change to the current situation, with more distressed assets flooding into the market by the end of the year. So the beginning of the reduction cycle might not be a quick fix, but at least easing has begun in earnest.


“The sentiment from banks hasn’t really changed, they are still quite reluctant to grant new mortgages,” said Reeves Yan, executive director and head of capital markets at CBRE Hong Kong.
“And the situation will continue towards the end of the year, as there are non-performing assets or distressed assets they are selling, so the banks are busy handling or resolving those problems,” Yan said.
Hong Kong banks have lowered their exposure to the city’s real estate sector. Total loans for property development and investment started to decline in the second quarter of last year. Loan levels in the most recent second quarter were the lowest seen since 2020, according to the HKMA.
“There may need to be 200 to 300 basis points of reduction until borrowers receive material relief, which may be until the end of next year to the beginning of 2026,” said Francis Ng, managing director and chief investment officer at real estate private credit firm Pacific Aegis Capital Management Group (PACM).
Experts also said rate cuts will not give substantial relief to borrowers who are under duress at the moment, as their property valuations are falling now and many are paying interest rates of nearly double digits.
“Interest rate cuts will also not be able to improve cash flow as property valuations keep dropping,” JLL’s Tsang said. “Those distressed owners will gain some room unless valuation rebounds, which won’t happen immediately and we have to wait for some time.”
On the issue of valuations, the prices of Hong Kong’s lived-in homes continued to fall in July, dragging an official benchmark to its lowest point in nearly eight years, according to the Rating and Valuation Department. The pricing index has slumped by nearly 30 per cent from its peak in 2021.


Owners who are pressured by flagging valuations and onerous interest rates are often forced to slash prices so they can quickly offload their property assets. The chairman of distressed mainland developer Agile Group Holdings sold a property last month in the city’s Kowloon Tong neighbourhood for less than half of what he paid six years ago. This was after the Guangzhou-based developer – strapped for cash – failed in May to pay interest on a US$483 million bond maturing in 2025.
In a filing to Hong Kong’s stock exchange, Agile said it “will not be able to fulfil all payment obligations under its offshore debts” due to the liquidity pressure.
“Luxury properties that have good locations are not immune to valuation adjustments. In fact, they are often at the forefront of enduring the sharpest adjustments,” PACM’s Ng said.
As valuations keep falling and banks stay on the sidelines, lenders of private credit are seeing more opportunities.
“With interest rates decreasing, we’re trying to lock in some of the higher interest rates,” said Kenny Ho, managing partner at Hong Kong-based wealth manager Carret Private Capital. “It’s about diversification into more fixed income and locking in higher rates.”
“We are paying attention to how interest rates affect commercial real estate. However, we are not too worried about decreasing interest rates affecting yields because we look at our overall portfolio, not just a single asset class.” Ho added that publicly traded bonds would carry yields of around 5 to 7 per cent, where private credit deals could have yields of 7 to 15 per cent.
“Private credit is always going to have a premium over liquid assets,” he said.
As an asset class, private credit in the Asia-Pacific region reached US$99.3 billion in 2023 and is expected to exceed US$100 billion by the end of this year, according to Preqin.
“We are actually more defensive in the loan-to-value ratio when the pledged property’s valuation drops because, essentially, we don’t need to borrow as much,” said Derek Cheung, chief marketing officer at Topaz Family Office. His firm and Carret have invested as limited partners in private loans that have used properties in the city as collateral.
“With reasonable valuations and conservative [loan-to-value] ratios, we are still interested in private credit loans against Hong Kong properties,” Cheung said. “Luxury properties will have their targeted buyers, a group of ultra-high-net-worth people. There’s less worry about not being able to cash out.”
But a dwindling number of luxury residential property transactions and falling prices have made it harder to find buyers, especially for properties that have been hit by foreclosures. Chen Hongtian’s HK$2.1 billion home at 15 Gough Hill Road has extended its tender period till the end of the year, after first being put on the market in August last year.

Under the current circumstances, buyers are very cautious, said Glen Ho, national turnaround and restructuring leader at Deloitte.
“There are indeed some deep-pocketed, financially healthy buyers looking to fish bottom the market, but they would usually prefer those really unique and rare properties,” he said.
There are a few glimmers of hope, though they may be a way down the road. Market experts said interest rate cuts will eventually serve as a catalyst for sentiment to change. And despite banks’ reluctance to lend to the property market and declining valuations, investors are confident about underwriting asset managers and seem generally optimistic about the macro picture, PACM’s Ng said.
In addition, there have been more enquiries from mainland buyers with tech and manufacturing backgrounds, CBRE’s Yan said.
“But they don’t have as much capital as before because of investment losses here and there, so they will be more cautious,” Ng said.
And the present environment has smoked out many highly leveraged, bad-quality property owners due to high interest rates in the past two years or more, he said.
“I am cautiously optimistic about Hong Kong’s property market given that the worst of real assets valuation may be over.”


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Hong Kong luxury property market grapples with high interest rates and falling valuations, forcing wealthy owners to sell at big losses


All across Hong Kong – from The Peak to South Island and elsewhere – high-net-worth individuals have found themselves caught in a tight spot between their ritzy, overleveraged properties and a quickly draining pool of liquidity.


Why rate cuts won’t save cash-strapped Hong Kong tycoons and their luxury properties

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Hong Kong luxury property market grapples with high interest rates and falling valuations, forcing wealthy owners to sell at big losses

Hong Kong luxury property market grapples with high interest rates and falling valuations, forcing wealthy owners to sell at big losses