Hong Kong landlords rush to sell commercial property amid market optimism, rate cuts

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Owners seize upon market optimism amid rate cuts and easing restrictions before a supply glut and uncertain economy derail sentiment

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Virtus Medical Tower, a 15-storey building in Central, is on sale. Photo: Jonathan Wong

Yulu AoandSalina Li

Published: 5:00pm, 11 Nov 2024

Landlords in Hong Kong are putting commercial property up for sale amid an improvement in sentiment thanks to falling interest cuts and eased borrowing restrictions, but a supply glut and uncertain macroeconomic outlook could prove to be deterrents, according to market observers.

Investors have regained some confidence and generally hold an optimistic view on Hong Kong’s property market, said Reeves Yan, executive director and head of capital markets at CBRE Hong Kong.

“The sale of commercial properties has been picking up after the easing of lending restrictions and interest rate cuts,” Yan said. “Since office prices in Hong Kong have adjusted by roughly 40 to 50 per cent from their peak, end users are sourcing suitable spaces for long-term use, while investors are looking for discounted deals to capture the future capital appreciation potential.”

Sentiment on the property market has seen an uptick since the interest rate cuts started in September. Last week, the Hong Kong Monetary Authority further lowered its base rate by a quarter point to 5 per cent. Subsequently, six major Hong Kong lenders reduced their prime lending rates for the second time this year, which trimmed borrowing costs to their lowest level in two years.

The Hong Kong government has also raised the borrowing limit and debt-servicing ratio for both residential and non-residential properties.

Virtus Medical Tower is owned by Tai Hung Fai Enterprises, which is controlled by billionaire Edwin Leong. Photo: Google Maps

S&P Global Ratings said that with interest rates still at elevated levels, individuals and small, financially aggressive property firms holding a large volume of Hong Kong commercial property assets could be forced to sell assets at steep discounts as they are unable to service debt costs at current rental yield rates.