How many times can one flat be used as collateral to raise money in Hong Kong?

The owners of a super-luxury Hong Kong flat that was recently foreclosed had used another flat on the same floor to use as collateral six times to raise money for more investments even as it stopped paying instalment on the first one.

Aggressive property investors like United Sunrise Properties – whose 2,476 square feet Unit B on the 39th floor of the prestigious 39 Conduit Road luxury development in Mid-Levels was foreclosed and will be auctioned off for HK$37 million less than the price at which it was bought in 2014 – had once bet recklessly on Hong Kong property and are finding themselves out of pocket as once-sizzling home prices lose steam.

When the going was good, these companies repeatedly refinanced their holdings and ploughed the money into even more properties and securities markets. But as the market began to cool since late last year, they – and those who lent to them – are struggling to square their finances.

“They used their properties like ATMs. Some didn’t think twice before remortgaging the properties at interest rates of 20 to 30 per cent,” said veteran property investor Jacinto Tong, who manages a property portfolio of HK$40 billion.

United Sunrise, jointly owned by mainlander businessman Yin Cong and Hong Kong partner Chan Wai-yun, used two luxury flats, including the foreclosed Conduit Road flat, to secure loans of about HK$100 million from more than six finance companies. It also owned four office units, all of which had to be foreclosed and sold off last month at a steep loss.