Rate Cuts Fail to Rescue Hong Kong’s Wealthy: The Struggle of Tycoons Amid Soaring Interest Rates and Plummeting Luxury Property Values

Why lowering interest rates won't rescue financially beleaguered Hong Kong moguls and their high-end properties

Hong Kong's upscale real estate market is struggling with soaring interest rates and plummeting property values, compelling affluent property owners to sell at substantial losses.

In the initial installment of a duo-series, Salina Li, Aileen Chuang, and Jiaxing Li delve into the impact of soaring interest rates on the metropolis's moguls and their prized property assets.

The luxury apartment is owned by magnate Chen Changwei, the head of Hengli Investments. He has been involved in the creation of both residential and business properties in China, and has overseen real estate in Hong Kong, London, and mainland China.

The unfavorable circumstances prevailing in the office market have impacted a HK$10.3 billion loan that was secured by Gaw and Hengli through their buildings. The rental income generated was inadequate to meet the interest payments, leading both companies to provide additional equity to the loan borrowing entity to compensate for the deficit, according to sources close to the situation. Yet, since the end of the previous year, Hengli has not made its contribution, the sources disclosed.

This exemplifies a wider pattern. Throughout Hong Kong – from The Peak to South Island and beyond – wealthy people find themselves in a difficult position due to their expensive, heavily indebted properties and a rapidly depleting source of liquid assets. This situation is due to their businesses experiencing a slowdown, high borrowing expenses, and escalating financial stress. Experts indicate that increased interest rates have led to a surge in borrowing costs for developers as lenders have hiked prime rates five times, amounting to a total of 87.5 basis points, reaching their peak since 2007.