The bank grants a blow to the indebted landlord

Starting from the second half of this year, the transaction prices and volume of first and second-hand residential properties have declined sharply. However, the ratio of landlords to cut loss by selling have been increasing in the opposite direction. Furthermore, the situation of the rents and transaction prices of shops and offices is worse than those of residential properties. As a result, these rents and sales prices have been falling by over 40%.

Until recently, ICBC Asia had appointed a liquidation company to take over two premises of the Tang Shing Po family's holdings, including the Hotel COZI Resort at Kin Fung Street, Tuen Mun, and the Riviera Plaza in Tsuen Wan. This bank affirmed its commitment to impose strict restrictions on non-performing landlords.

In fact, the latest market value of quite a number of shops and commercial properties has fallen by 40 to 50% from the record high, and many of the owners of such properties had remortgaged their premises, so their monthly repayment had exceeded their ability to repay. Consequently, banks or financial institutions may take a similar action soon against borrowers who are unable to fulfill their repayment schedule.

Those valuable insolvency premises of wealthy investors will be confiscated. Therefore, these landlords will go bankrupt one after the other.

While the vacancy rate of shop and commercial properties has been rising, the rents and prices are declining at the same time. The vacancy rate of grade A office rose to 17%. The pre-let rate of the second phase of the Cheung Kong Center was  only 10%. In the shops market, the vacancy rate of strong resilience of local shops surged due to diminished consumption power.

When these investors are going to bankrupt one by one, a large number of valuable assets will be resold at large discounting prices, which will inevitably push down the commercial and shop market. Eventually, even if the real estate tycoons can survive after the hit of this economic headwinds, it is inevitable that their total net assets will be reduced in half.