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Monday, November 20, 2017, 23:01
Global investor interest boosts HK property ranking
By Evelyn Yu
Monday, November 20, 2017, 23:01 By Evelyn Yu

In this Feb 3, 2014 photo, apartment buildings are seen clustered together in Hong Kong's Kowloon district. Renewed international investor interest has pushed Hong Kong’s ranking as a real-estate investment market in the Asia-Pacific. (ALEX OGLE / AFP)

HONG KONG – Renewed international investor interest in Hong Kong’s pent-up prices and retail rebound pushed the city from 18th to 13th place as the most-popular real-estate investment market in the Asia-Pacific.

The revision comes in the Emerging Trends in Real Estate Asia Pacific 2018 report, a real-estate forecast jointly published by the research organization Urban Land Institute (ULI) and accounting firm PwC.

Despite Hong Kong’s highly illiquid market, good assets are very expensive and owners have little incentive to sell, said KK So, Asia-Pacific real estate tax leader at PwC. A number of large transactions made Hong Kong the biggest investment destination in Asia in the first half of this year, he concluded.

The retail market appeared to have bottomed out after years of declines. In the commercial space, investors are looking at value-added investment opportunities.

Many deals in Hong Kong involved Chinese mainland developers looking to diversify away from low-margin deals in their domestic market

“There is a rental differential between Grade-A and Grade-B buildings, investors are looking to refurnish property and upgrade it,” So noted.

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Many deals in Hong Kong involved Chinese mainland developers looking to diversify away from low-margin deals in their domestic market.

Keen competition in the mainland, which boosts land costs, had squeezed margins. The flurry of central-government policies to curb the red-hot domestic market, such as capping their prices and mandatory allotment of affordable housing as part of commercial residential sites, also added to pressure on selling prices, said Colin Galloway, ULI consultant and principal author of the report. 

The top five Asia-Pacific markets for investment and development in 2018 are Sydney, Melbourne, Singapore, Shanghai and Ho Chi Minh City.

Sydney and Melbourne shared the same appeal to investors in the mature Australian economy with a liquid market of core assets and relatively good yield by Asian standards, the report finds.

Both cities offer a projected around 5 percent annual net effective rental growth in the next three to five years. Assets in the two cities have drawn strong demand from both domestic and international investors. International investors represented about one third of total transactions in the first half of this year in Sydney.

Singapore has resurged from 21st place last year to third this year. After two years of rent declines caused by a sluggish economy and supply glut, the promise of a bottom in Singapore’s office market pushed its ranking from a bottom to top place, the report said. The residential sector is also rebounding, as mainland developers have been especially active in buying land in Singapore, pushing up land auction prices for residential sites this year.

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Shanghai is seeing an increase in transactions driven partly by surging demand from domestic buyers who are unable to export capital amid the regulatory crackdown. Shenzhen and Guangzhou are the other two mainland cities which made the top 10 list, coming sixth and eighth respectively. The Greater Bay Area scheme has boosted investors’ appetite for Pearl River Delta cities.

An increasing number of regional developers and private equity finds are betting on Ho Chi Minh city, hoping it offers a repeat of the mainland experience in terms of property price inflation.

The mainland government’s capital controls have had a modest impact on sovereign and state investors, and a substantial body of mainland-owned capital is held outside the mainland, much of it in Hong Kong.

“And if the Chinese capital can’t come out, they will only push the domestic price up,” said Galloway.

Emerging Trends in Real Estate Asia Pacific is an annual forecast report based on surveys and interviews with property owners, developers, fund managers, institutional equity investors and other entities across the region.

evelyn@chinadailyhk.com


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