Hong Kong commercial property downturn to worsen amid tightening credit: agents

Commercial property prices in Hong Kong are expected to keep falling, with the market potentially becoming trapped in a cycle of tighter lending and reduced demand, warns a property agency. Banks have become more cautious about approving mortgages for commercial properties over the past three years, implementing stricter criteria and terms, said Eric Tso Tak-ming, chief vice-president at mReferral Mortgage Brokerage Services.

In the current year, only around 20 percent of commercial property deals involve mortgage loans, a significant drop from previous high levels seen in the early 2010s, according to Tso. Large banks are increasingly hesitant to take on the risks, with only medium and small banks more inclined to offer mortgages. Large banks are reassessing loan applicants, examining their background, repayment capacity, and asset liquidity, before deciding to lend.

When the market peaked in 2012 and 2013, about 30 to 40 percent of transactions were mortgage-driven, Tso noted. Banks are more likely to offer loans to those with strong financial backing, particularly for commercial properties in high-grade office buildings and those with high trading activity, he added. Some commercial property prices in Hong Kong have dropped over 40 percent from their peak values.

In August, grade A and grade B office prices were down 48.5 percent and 49.2 percent respectively from historical highs, while industrial and retail prices were down 37.2 percent and 47.1 percent. While the number of commercial property transactions in the first eight months of 2026 increased by 14.5 percent year-on-year to 3,494, the total value of these deals fell by 3.5 percent year-on-year to HK$36.2 billion.

This price decline could trigger a self-reinforcing cycle, as the importance of commercial real estate as collateral for corporate loans grows. If property values and rental income continue to decline, owners and businesses may face challenges in refinancing, supplementing collateral, or meeting repayment deadlines, accelerating the downward spiral.