Hong Kong’s real estate struggles as investment falls 13% in 2024

Investment activity totaled US$1.5b in the fourth quarter alone, marking a 29% YoY drop.

Hong Kong’s real estate investment market faced challenges in 2024, with total investment volume reaching US$4.6b ($35.79b), reflecting a 13% YoY decline.

In its report, JLL also noted investment activity totalled US$1.5b ($11.67b) in the fourth quarter alone, marking a 29% YoY drop.

It said the market was primarily driven by distressed asset sales, as investors remained cautious amid ongoing economic uncertainties and high financing costs.

The office market saw some notable activity, with transaction volumes bolstered by the receivers' sale of a premium office building previously owned by mainland developer Cheung Kei Group.

Retail properties continued to attract interest from mainland Chinese investors, who remained active in the market despite broader challenges. Cross-border investments into Hong Kong were primarily driven by these investors, focusing on retail assets as they sought opportunities in the distressed market.

The market continues to face significant headwinds from high financing costs, which are disproportionately higher than in regional peers. These elevated costs have placed additional pressure on asset owners, leading to reduced cash flow and dampened investment activity.

Looking ahead, JLL said there is cautious optimism as financing costs are expected to decrease in 2025. This could potentially improve leveraged internal rate of return (IRR) performance, encouraging more investor participation.

However, the market is likely to face continued uncertainties related to economic conditions and investor sentiment, requiring strategic approaches to navigate the evolving landscape.
 

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