In recent years, Hong Kong's luxury housing market has seen a rare wave of selling. Luxury homes that once symbolized wealth and status are now frequently changing hands at low prices in the wave of selling by the rich. Many luxury homes that were once sold at high prices can now only be sold at one-third to one-half of the original price, reflecting the deep-seated changes in Hong Kong's economic environment and the real estate market in China and Hong Kong.

Over the past decade, with the rise of China's economy, Hong Kong's real estate market has experienced rounds of rapid appreciation. International tycoons and mainland tycoons have flocked to this international financial center, driving up housing prices. However, with China's economic growth slowing, the mainland real estate market sluggish, and the tightening financing environment, Hong Kong's luxury homes have gradually lost their former glory. In Hong Kong's top residential areas such as Plantation Road and Blackwell Walk, many luxury homes are sold at low prices, and there are many wealthy people among the luxury homeowners who are forced to sell their assets due to a shortage of funds.

Reasons behind the shrinking wealth and the sale of luxury homes

Behind this wave of luxury home sales, in addition to the capital chain pressure brought about by the slowdown in mainland economic growth, there are many other factors intertwined. First, the collapse of China's real estate market has led to a shortage of funds for mainland real estate companies, and some real estate giants such as Evergrande Group have even fallen into financial crisis. Its founder Xu Jiayin once owned many luxury homes in Hong Kong, but due to Evergrande's debt crisis, some of his properties have been confiscated or sold at low prices by creditors. Evergrande's properties, mostly in Hong Kong, are no longer a symbol of its wealth, but have become victims of debt repayment.

Secondly, high-end properties in Hong Kong's real estate market are facing a double squeeze from internal and external economic factors. Although Hong Kong's overall economy has shown signs of recovery after the epidemic, it is still sluggish compared with its high point before the epidemic. In addition, Hong Kong's political environment has changed and its status as an international financial center has been challenged, causing many foreign capital and companies to re-examine the safety and necessity of investing in Hong Kong. Under the pressure of the local economy, the commercial real estate and residential markets have seen a high vacancy rate, even reaching 17%. Landlords and developers are also facing financial pressure and increased loan costs.

The vicious cycle of market winter and bank loan tightening

During this round of luxury home selling, banks' loan policies have also changed. In order to reduce risks, banks tightened real estate-related loans, and loan costs increased, forcing some developers and wealthy people to face greater financial pressure. The deterioration of financial problems of mainland developers such as Evergrande has further aroused the vigilance of banks, and the increase in the number of loan defaults has forced banks to raise loan interest rates.

At the same time, the interest rate policy of the Hong Kong Monetary Authority closely follows the Federal Reserve, and the current interest rate has reached a high of 5.25%. Even if the HKMA may lower interest rates in the future, the high interest rate environment in the United States still keeps Hong Kong's financing costs high. Faced with rising borrowing costs, many asset holders choose to sell their properties quickly in exchange for liquidity to avoid further financial crises.

"High places are cold" in Hong Kong's luxury home market

The downturn in Hong Kong's luxury home market is not only reflected in the selling wave, but also in the decline in demand and lower pricing. Once upon a time, the supply of luxury homes in Hong Kong was extremely small and was called a "scarce product" in the market. However, with the changes in the economic environment and the shift in market demand, it is becoming difficult to find suitable buyers for high-priced luxury homes. Even with the continuous reduction in prices, many luxury homes are still unsold. For example, several luxury homes in the famous Opus Building designed by Gehry were initially sold at very high prices, but now two wealthy people have sold their properties at a discount.

In the high-end residential market in Hong Kong, more than 20 luxury homes have entered the market in recent years, all of which are priced at more than 50 million US dollars. This figure not only reflects the increase in supply in the current market, but also reflects the financial pressure and eagerness of the wealthy to cash out. Many wealthy people no longer expect luxury homes to bring them high returns, but hope to alleviate their liquidity crisis by selling them.

The future of the market: will it recover or shrink further after the cold winter?

The cold winter of the Hong Kong real estate market is still continuing. Although the government and the HKMA have certain policy interventions and interest rate adjustments in the market, the road to recovery is full of uncertainty. Hong Kong's economic recovery depends on the steady growth of the mainland economy. However, the current mainland economy is also experiencing adjustments and downward pressure, and the support for the Hong Kong market in the future may be limited.

Many market experts believe that although there are wealthy people willing to sell luxury homes at a discount, the Hong Kong luxury home market will still face low prices and weak transactions in the short term due to insufficient confidence of buyers and financing difficulties. In particular, those sellers who are greatly affected by the mainland economy may continue to choose to sell their properties before the mainland economy recovers fundamentally.

The selling spree in Hong Kong's luxury home market appears to be the result of the wealthy selling their properties due to capital needs, but it reflects the close connection between Hong Kong and the mainland economic environment at a deeper level. Under the current economic situation, Hong Kong's wealthy have to pay for their past high-leverage investments, and the continued downturn in the luxury home market has also brought greater pressure to financial institutions and buyers and sellers. The future direction of Hong Kong's real estate market will depend on whether Hong Kong can maintain its position as an international financial center and regain buyer confidence in the economic recovery. This wave of selling is also a reminder that behind the glorious luxury homes, there is not only a symbol of wealth, but sometimes also a heavy burden.