Hong Kong Commercial Property Downturn May Deepen as Banks Tighten Lending

Hong Kong’s commercial property market could face further pressure as tighter bank lending standards weaken demand and risk creating a cycle of falling prices and reduced financing, property agents have warned.

Banks have become more cautious about approving mortgages for commercial properties over the past three years, introducing stricter requirements and loan terms, according to Eric Tso Tak-ming, chief vice-president of mReferral Mortgage Brokerage Services.

Only about 20 per cent of commercial property transactions in Hong Kong this year have involved mortgage financing, a sharp decline from levels recorded during the market’s peak in the early 2010s.

The reduced availability of credit is making it more difficult for potential buyers to complete purchases, particularly as commercial property values and rental income remain under pressure.

The market has already experienced a prolonged downturn following the pandemic, with weaker retail activity, changing consumer patterns and higher financing costs affecting shops, offices and other commercial properties.

Recent data also show a divergence between transaction volumes and property values. The number of industrial, commercial and shop transactions increased during the first eight months of 2026, but the total value of those transactions declined, while average prices for office and commercial units reached new lows.

Property agents expect the pattern of higher transaction volumes but lower prices to continue through the end of the year.

Falling property values can create additional difficulties for owners who rely on their assets as collateral for loans. Lower valuations may reduce borrowing capacity and increase pressure on owners facing refinancing requirements.

The combination of weaker demand, lower prices and tighter lending could therefore reinforce the downturn. With fewer buyers able or willing to use bank financing, transaction activity may remain concentrated among investors with greater access to cash.

Hong Kong’s commercial property sector is also facing broader economic changes, including shifts in retail demand and office requirements as businesses adjust their operations.

The outlook will depend partly on financing conditions and whether buyer confidence improves. For now, property agents say the combination of conservative bank lending and weak demand remains a significant obstacle to a sustained recovery in the commercial property market.