Hong Kong Property Investment in Non-Residential sector to Double to Near US$13 billion

Posted on 20 July, 2021 | By Property852

According to Cushman, big-ticket Hong Kong property investments will likely more than double to HK$100 billion (U.S. $12.9 billion) this year, the best since 2018, with eager local investors and international funds seeking non-residential properties.

Cushman and Wakefield states that non-residential sales, each worth over HK$100 million, are projected at approximately 200, with volume of HK$90 billion to HK$100 billion.

Cushman’s Director and Research Executive, Keith Chan, stated that last year, HK$48.8 billion was generated by just 79 deals. Chan said that 2021’s total consideration will likely reach half of the 2017 or 2018 peaks.

As the local COVID-19 outbreak is better controlled and the economy recovers, institutional and local investors with abundant capital are seeking investment opportunities.

In 2021’s first half, the city’s commercial real estate market recorded 89 deals, totaling HK$43.1 billion, up 97% year-over-year. However, this number is dwarfed by 2017’s peak, with 256 deals recorded in a booming economy, totaling HK$176.6 billion.

One of the largest recent transactions was the sale of Kowloon Bay International Trade and Exhibition Center for HK$10.5 billion in June, helping the office sector reach 40 percent of total volume during the first half.

According to Cushman, the retail sector recorded the most deals due to local investors who favored smaller assets, but also greater long-term growth possibilities. With travel restrictions, local investors have dominated the market, but institutional investors have recently begun looking at industrial buildings and development sites. Thirty percent of total consideration consists of industrial properties, a substantial increase compared with an average of 14 percent over the past decade, due mainly to relatively low unit prices, favorable government policies, and possible use conversions.

With the high level of investment activity in development sites and industrial buildings for possible residential conversion, the number of Hong Kong apartments available should increase substantially over the next few years.

Abundant capital will be chasing diminished stock, whether for redevelopment or investment. Therefore, prices will likely increase 3 to 5% further for three to six months, according to Deputy Managing Director James Siu of Kowloon at Savills. The bullish forecast arose as the city's economy grew and prices for Hong Kong apartments increased this year. The city’s Rating and Valuation Department’s overall index indicates that as of May, due to a five-month home price rally, prices were just 0.8 percent shy of the 2019 peak.

The rally followed a brief slump due to last year’s coronavirus outbreak and the possibility of residents leaving the city following the 2019 protests and implementation of the controversial national security law. However, with the pandemic receding and the economic conditions improving, sales of Hong Kong apartments, as well as interest in Hong Kong apartments for rent are likely to be strong.

While we predict the price level of most commercial sectors will bottom out during 2021, the few months ahead should provide investors time to acquire properties prior to prices rebounding in most sectors, stated Rosanna Tang, Head of Research in Hong Kong and Southern China at Colliers.

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