Hong Kong's rich families sell their own dwellings to cut debt
[HONG KONG] Hong Kong's rich families are learning about the unpredictability of market downturns. Now some have to sell the homes they live in to cut debt.
This week, a sea-view villa previously owned by wealthy businessman Chan Ping Che was listed by receivers for HK$430 million (S$71 million). Meanwhile, investment firm Gale Well Group's chief executive officer Jacinto Tong sold his penthouse apartment for HK$138 million last month, according to land registry filings.
Chan, known as Hong Kong's 'King of Cassettes' for the source of his fortune, defaulted on a loan worth about HK$350 million in principal and interest from Fubon Bank Hong Kong earlier this year, he said on Wednesday (May 21). Last month, receivers took over the mansion he and his family were living in since the 1980s.
Chan had tried to sell the property since late 2023, but did not manage to find a buyer, he said by phone.
Hong Kong has seen a flurry of mansion firesales, following years of high interest rates and a property downturn. Despite a recent decline in borrowing costs in the city, residential prices are still hovering at an eight-year low, according to the Centaline Property Centa-City Leading Index.
The city's prime office vacancies are set to increase, driving rents down by 8 to 10 per cent this year, according to Colliers International Group.
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'People often use leverage to purchase additional properties, amplifying returns when prices rise, but also magnifying losses when prices drop,' said Christopher So, a partner at PricewaterhouseCoopers in Hong Kong. 'As the market weakens, rental demand and yields also decrease, impacting cash flow for servicing debt and leading to rising rate of default.'
Chan bet big on Hong Kong property, investing in residential units, retail shops and parking spaces. He made his name in real estate in 2017 when he joined a consortium to spend US$5.2 billion to take over most floors of the Center, a skyscraper in the financial hub's business district.
He sold two floors to DBS Bank for more than HK$1.3 billion combined last year, according to land registry filings. It was lower than what he paid for, local media reported.
For Gale Well's Tong, he and his sister, Rita Tong put about HK$2.2 billion worth of properties up for sale this year, according to data compiled by Bloomberg. They include luxury homes, offices and shop space.
In November, Jacinto Tong said that 'making money or posting a loss is a secondary matter, and the most important thing is to avoid negative equity', according to his Facebook post for a hotel sale. He added that the company was trying to maintain a healthy leverage ratio.
Tong did not immediately respond to phone calls by Bloomberg News.
'Investors suffering significant losses from office properties might need to consider selling their residential properties to repay debt,' said Bloomberg Intelligence analyst Patrick Wong. The latter are still seeing stronger demand from investors and mainland population inflows, he said.
Last year, a prominent local clan led by Ho Shung Pun sold seven luxury houses at the Peak to pay back private loans.
The flurry of offerings adds pressure to a property market that's seen one of its longest downturns. Home prices are 29 per cent below their peak in 2021, government data show. The number of households with negative equity – when the value of a property is lower than the outstanding mortgage loan – rose to the highest since 2003 at the end of March.
Luxury home transactions have been improving since the last quarter of 2024, but prices are not reflecting the sentiment due to a surplus of distressed assets, according to a Savills report in March. BLOOMBERG
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