Hong Kong real estate transaction volumes hit 10-year lows in 2022

Only 101 big deals were closed during the year.

According to a Colliers report, the Fed’s sharp interest rate hikes and suppressed commercial property rents caused by the strict quarantine measures in Hong Kong and China crimped the investment market recovery in 2022. 

Transaction volumes in 2022 almost halved YOY, with only 101 big deals being concluded, the lowest level in the last 10 years. The turnover, however, declined by only 4% YOY at HKD70 billion.

Here’s more from Colliers:

Distressed sales increased in H2 due to the sharp rate hikes and the rebalancing of the Mainland real estate market, as at least six big foreclosure deals were concluded in 2022, including the disposal of Goldin Financial Global for HKD 5.6 billion which was the largest distressed sale in 2022. 

As most funds had capital to deploy, they remained the most active market players in 2022, accounting for 62% of the investment turnover. However, starting from H2, they demanded higher cap rates (over 4%) to justify their acquisitions, yet most sellers were still unwilling to lower their asking prices. 

Against this backdrop, in Q4, premises that offered high yields or distressed sales became the hot-spot. Capital values of Grade A offices and warehouses dropped in Q4, as buyers wanted higher cap rates to offset the extra interest expenses.