Hong Kong's Distressed Property Sales Are Slowing – But Not Over

Hong Kong's office and retail property market has been hurting for years. New buildings kept coming while demand slowed and borrowing costs shot up. That pushed many owners into default. Now, analysts say the worst might be over. Interest rates have dropped, and much of the price correction has already happened. So the number of new defaults is expected to level off.

But that doesn't mean the pain is gone. Banks are still offloading distressed assets, often through forced sales, to recover cash. These so-called mortgagee sales remain a big part of the market. Meanwhile, highly leveraged owners still face a challenge when trying to refinance their loans, even though interest costs have fallen. The one-month interbank borrowing rate, Hibor, is around 2.6%, bringing effective funding costs to 4–5%, down from 7–8% in late 2023.

There are signs of life. In the first half of the year, non-residential property deals above HK$50 million totaled HK$22.3 billion — up 120% from the same period last year. Offices made up more than two-thirds of that. That suggests buyers are coming back, attracted by lower prices and a more liquid market. Still, the recovery is fragile. As Colliers' Thomas Chak puts it, defaults may not increase, but banks will keep selling distressed assets to take advantage of this window. For anyone watching Hong Kong's economy, this is a market slowly stabilising — not fully healed.