Wealthy Hong Kong families sell mansions at losses amid property market downturn

Around 75% of high-end property transactions in the first half of the year involved financially stressed sellers, according to data from property consultancy firm CBRE Group. A high-end unit is priced starting from $10 million.

"There have been quite big changes because for the past 15 years, family owners didn’t bother to sell," said Reeves Yan, head of capital markets at CBRE Hong Kong, as cited by Bloomberg.

Mansions were usually only sold by developers conducting business, he said. "But now there are a lot of small or medium family owners selling because they are under pressure."

Local media reported that three mansions on Peak Road were recently sold for HK$860 million (US$110 million).

The houses are linked to Ho Shung Pun, director of Kowloon Investment, a property investment firm established in 1955.

He had earlier sold four properties at a luxury area for HK$1.1 billion. The transaction price was about 50% less than the valuation at the height of Hong Kong’s property market in 2017, according to Savills, which brokered the deal, SCMP reported.

His family this year has pledged at least 12 properties to take out loans of $350 million, Bloomberg calculations show.

Public filings also show that Ho and a family member borrowed HK$85 million from a moneylender at an interest rate of 29% for part of the sum and 18% for the rest.

Hong Kong’s property market is in a slump, and developers have to cut prices by up to 30% to pump up sales as investors and buyers are reluctant to put down payment amid high interest rates.

Raymond Ho, executive director of capital markets at Jones Lang LaSalle in Hong Kong, said that some property owners have been encouraged by banks to obtain additional charges on their already mortgaged properties when interest rates were low a few years ago.

"However, these property owners are now confronted with the double impact of a property price correction and high interest rates," he said.

The family of Tang Shing Bor, a Hong Kong retail magnate, also has to lay off some assets to pay debts.

In May they sold a shop for HK$32.5 million, suffering a 60% loss, according to local newspaper The Standard.

Receivers have seized at least eight properties owned by the Tangs this year as the son Tang Yiu Sing and others were sued by a creditor in July for HK$1.1 million in outstanding loan payments.

Lai Sun Development, a company run by the family of late industrialist tycoon Lim Por Yen, in April sold a 10% stake in the AIA Central office for a loss of about HK$154.6 million.

ITC Properties Group also sold a property for a HK$4 million loss. The group was founded by Charles Chan Kwok Keung, former chairman of Hong Kong’s Television Broadcasts.

CBRE’s Yan said that more families are likely to offload properties this year as the U.S. Federal Reserve shows no signs of cutting rates, which means homeowners in Hong Kong could have to pay borrowing rates of more than 5%, higher than the city’s typical rental yield of 3%.

"You can imagine that if this situation drags longer, more and more owners will face difficulties," said CBRE’s Yan.

"Some of them may default on their interests, get cash flow problems and be forced to sell their property."