(Bloomberg) -- The four-story 1920s townhouse in Hong Kong’s Mid-Levels district survived Allied bombing runs during the war. It escaped the demolition wave of the 1970s and ’80s, which replaced the hillside neighborhood’s terraced houses and grand mansions with towering apartment blocks. Now a real estate slump may help preserve the neo-classical building, which is up for sale for the first time in decades.

Typically the outcome for a low-rise property would be the kiss of the wrecking ball, given the potential redevelopment rights. But demand has collapsed and mortgage rates have surged to rewrite the calculus even in such a fashionable area. That’s especially the case for a smaller plot like 35 Bonham Road, where an investor would need to acquire neighboring land to make a project viable.

The property market’s depression is deepening. Government revenue from land sales this year is set for a record low as developers hold off adding to their land bank. Sales of homes are on track to be the lowest ever, according to Land Registry data for the first 11 months of the year. Home prices have plunged more than 20% from their 2021 high to an almost seven-year low, and analysts predict declines to continue in 2024.

Stock investors are even more pessimistic: Shares of New World Development Co. fell to a 20-year low this week, while Sun Hung Kai Properties Ltd. traded at levels not seen since 2009.

That’s bad luck for the multiple owners of 35 Bonham Road, who have put their holdings up for sale after the government, keen to promote urban renewal, last year made it easier for majority owners of older buildings to force a sale on remaining stakeholders. Three floors and a basement with a combined size of some 5,000 square feet are on the market for HK$141 million ($18 million). The top floor isn’t part of the deal, but the landlord is prepared to accept offers, said Tony Yiu, who is an agent for the sale at Centaline Property Agency Ltd.

Potential buyers of the Tiffany blue, grade 2-listed property include a family office looking to convert the building into a boutique hotel, as well as a real estate developer, said Yiu, adding that discussions are ongoing. Currently the lower three floors are unoccupied, after a beauty salon moved out during the pandemic, while the top two floors are rented out as apartments. The owners declined a request to photograph the interior.

There is appetite for preservation. A four-story 1930s shophouse in Wanchai was recently renovated and now hosts a restaurant and cigar bar. Another three-story building from that era in Happy Valley became a photography museum after restoration.

The townhouse at Bonham Road in Sai Ying Pun was likely built around 1925, based on maps from the period, as part of a terrace of similar buildings. Lee Yuet’s family were among the first inhabitants. The retired senior government architect was born in the lower ground floor apartment in 1934 and lived there until he was eight. Entering his childhood home for the first time in some 80 years, Lee’s recollections bring to life a past age. While his early memories are happy ones, war would bring drastic change.

After Japan invaded China in 1937, his family was joined by many of his relatives fleeing across the border. Soon there were about 30 people packed into the 1,600-square-foot property, some sleeping in bunk beds, some on the floor. But by 1941, Hong Kong was under threat too. Walking around the basement apartment, which has 13-foot-high ceilings, whitewashed walls and what appears to be original ornate metalwork, he spoke about his mother deep frying yams by the bucketload in a small lightwell for hoarding in a wartime emergency. “I can still remember the smell,” he said. In December, 35,000 Japanese troops attacked Hong Kong, defeating the much smaller local garrison after a two-week battle.

Some months into the occupation, Lee and his family left for neighboring Guangdong province along with hundreds of thousands of other desperate residents. They would return after Japan’s defeat in 1945 as the civil war between the Communists and the Nationalists erupted in China, prompting another wave of refugees, but they were never able to return to their former home on Bonham Road.

Continued tumult in China would further swell Hong Kong’s  population. In 1961 there were 3.1 million residents — almost double that of 20 years earlier. By 1979, it had increased to 5 million. Rising incomes fueled by Hong Kong’s transition into first a manufacturing center and then a financial hub helped accelerate demand for housing. The city of neo-classical buildings and Chinese shophouses that still largely existed in the 1960s was rapidly erased. Today Hong Kong holds the record for more high-rises than any other city.

Andrew Tse started documenting what he termed the vanishing city in 1980. Several photos posted on his popular Flickr account show 35 Bonham Road, then painted white, in its original terraced setting around that time. The neighboring townhouses are empty and would be torn down soon after.

The government took belated steps to protect Hong Kong’s heritage in the early 2000s amid an increasing public outcry over the scale of the destruction. A grading system of more than 1,440 historic structures commenced in 2009.

The balconied townhouse at 35 Bonham Road was awarded a grade 2 listing, defined by the city’s Antiquities Advisory Board as buildings of special merit which should be selectively preserved. Yet this does not prevent redevelopment, with the board saying in a Q&A on its website: “The grading does not affect the ownership, management, usage and development rights of the buildings.” Only protected monument status forbids demolition; 134 structures have that grading. These include institutional buildings such as government offices and schools, as well as mansions built by wealthy merchants.

Alfred Ho, founder of Urban Studies Institute, a group advocating for preservation of historic buildings, wants to see greater efforts made to protect less grand structures, such as the Bonham Road property, that help illuminate the city’s broader history.

“When it comes to preservation of historic buildings, it shouldn’t only be about rich people’s mansions,” he said. “Common people’s buildings, which are becoming rarer nowadays, can better reflect what daily lives and international trends used to be in the past.”

For now, 35 Bonham Road provides a tangible link to a different era; a reminder of the powerful economic forces that helped transform a thinly populated area of fishing villages and pirate dens into one of the most densely populated and wealthy places on the planet; a relic whose fate offers a measure of the property market's downturn.

For Lee, it was home.

“I was born here, I spent my childhood here, and I have very fond memories of this building,” said Lee. “I don’t want to see the building left vacant. I hope it can be made better use of.”



--With assistance from Shawna Kwan.

©2023 Bloomberg L.P.