China’s tycoons sell luxury Hong Kong homes at steep discounts

Last week, An Zhifu, president of Sichuan-based Fulin Group, a private business with assets of 20 billion yuan (US$2.8 billion), sold a luxury flat in the city’s affluent Mid-Levels residential area at HK$65 million (US$8.35 million), 35% lower than its last sale price of HK$101 million in 2016, as reported by the South China Morning Post.

Similarly, Ho Shung Pun, director of real estate investment firm Kowloon Investment Company, had to offload seven luxury homes at considerable discounts earlier this year.

But perhaps the most notable transactions involved European-style residences previously owned by Hui Ka Yan, chairman of the former property giant China Evergrande. These properties, seized by creditors after the company collapsed, were worth a total of over US$190 million.

One of them was sold this year for US$58 million, less than half of its purchase price of US$130 million in 2009, according to real estate agency Knight Frank.

High-end luxury property sales have been largely driven by so-called "distressed sellers," whose homes have been repossessed by banks or creditors to recoup unpaid debts, Hannah Jeong, an executive director at real estate services firm CBRE, told The New York Times.

Some of these sellers are tied to the Chinese economy, which has seen slowed growth and falling prices. With Hong Kong’s economy and real estate market closely linked to the mainland, they too are experiencing the impact.

According to Jack Tong, Hong Kong director of research at property consultancy Savills, some high-end properties sold in the first half of 2024 were discounted by up to 50% compared to their peak prices in 2018.

Data from Savills shows that 23 properties were bought for over HK$200 million during the period, up 53% from the same period last year.

Tong told Business Insider that most buyers were from cash-rich families or industrialists with the liquidity to make swift purchases.

"The lack of ultra-high-net-worth mainland tycoons due to slower China economic growth and stricter capital outflow restrictions meant no more record-breaking prices registered for the sake of trophy assets as in the pre-Covid period."

More deals are expected to follow, according to property experts. As the U.S. Federal Reserve began a series of interest rate cuts in September, Hong Kong's monetary authority followed with a drop in base interest rate to 5.25%. However, this is still the highest level since 2007.

Hong Kong’s interest rates align with those in the U.S. because the local currency is pegged to the greenback.

The teritory also recently increased the borrowing limit and debt-servicing ratio for buyers of both residential and non-residential properties, and lifted all buying restrictions in February.

Lucia Leung, director of research and consultancy at Knight Frank, said these factors, combined with a buoyant stock market, have stimulated sales of luxury homes.

In October, 20 luxury homes were sold in Hong Kong, up from 12 in September, according to Knight Frank. The value of these transactions totaled HK$4.15 billion, up 170% from the HK$1.54 billion recorded in the previous month.