SALES of commercial real estate and residential buildings in Hong Kong fell to a 19-year low in the second quarter as high interest rates took a toll on investment property transactions.

The city recorded just HK$2.7 billion (S$461.5 million) of deals in the period, Colliers International Group said on Wednesday (Jul 12). The weak performance was largely due to a lack of transactions in office and industrial properties, said Thomas Chak, co-head of capital markets and investment services at Colliers.

“Investors are expected to remain prudent in the coming months, affected by the sluggish mainland Chinese economy and anticipated further rate hike by the US Fed in the second half,” he said.

The office sector remains under pressure with a vacancy rate of about 15 per cent city-wide. Rents fell 2 per cent in the first six months even after the border reopened at the beginning of the year, data from Colliers showed.

Generally, demand for industrial real estate including warehouses is more resilient than offices. But high interest rates have deterred investors in recent months as the rental yield struggles to keep up with borrowing costs, said Chak.

Colliers forecasts total investment to decline by 50 per cent in 2023 to HK$35 billion, with values of both offices and industrial real estate expected to fall. BLOOMBERG

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