Hong Kong's real estate market is down, making distressed properties a new hotspot.

Due to higher interest rates and Major Foreign Exchange Tradersa large number of vacant retail and office spaces, distressed property investments in Hong Kong saw an increase in sales during the second quarter. The real estate market was already sluggish, and real estate agents expect this trend to continue.

Real estate agents indicate that lenders and property owners are increasingly accepting larger losses, leading to a rise in such transactions in a market with high interest rates and declining rental income.

Distressed properties typically refer to those nearing foreclosure, already owned by banks, or repossessed by lenders. Because of their relatively low prices, these properties can become attractive investment options.

According to data from real estate services company Colliers International, half of the 22 investment properties sold in the second quarter were foreclosure sales or sold at a loss. In comparison, only a quarter of such transactions occurred in the first quarter, while the proportion was 26% for the entire year of 2023. Colliers only tracks transactions valued at over HKD 100 million (approximately USD 12.8 million).

Thomas Chak, Co-Head of Capital Markets & Investment Services at Colliers International Hong Kong, stated, "In the second half of the year, we will see more distressed transactions and discounted properties entering the market."

"This will put pressure on market prices."

Last year, Colliers International established a restructuring services team in Hong Kong, the second in the Asia-Pacific region after Australia, to address the growing demand for loan recoveries from lenders.

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The market carries risks, and investment should be cautious. This article does not constitute personal investment advice and has not taken into account individual users' specific investment goals, financial situations, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their particular circumstances. Investing based on this is at one's own responsibility.

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