{"id":28923,"date":"2021-04-15T20:14:07","date_gmt":"2021-04-16T03:14:07","guid":{"rendered":"https:\/\/www.yardi.com\/blog\/?p=28923"},"modified":"2021-04-30T08:17:56","modified_gmt":"2021-04-30T15:17:56","slug":"hong-kong-real-estate","status":"publish","type":"post","link":"https:\/\/www.yardi.com\/blog\/hong-kong-real-estate\/","title":{"rendered":"Hong Kong real estate"},"content":{"rendered":"

Is Hong Kong is poised for a real estate resurgence?<\/p>\n

Two years ago, Hong Kong was the world\u2019s third largest real estate market, trailing only New York and London. The twin challenges of protests and a pandemic have taken their toll. So last week, Yardi called in the experts for their take on Hong Kong\u2019s future.<\/p>\n

David Green-Morgan<\/strong>, managing director at Real Capital Analytics in Asia Pacific, Tommy Wu<\/strong>, lead economist for Oxford Economics in Asia, and Yardi regional director, Bernie Devine<\/strong> gathered for the first instalment of Yardi\u2019s 2021 Executive Briefing Series. Here\u2019s why they think Hong Kong real estate is ready to bounce back.<\/p>\n

The macro indicators are positive\"\"<\/strong><\/p>\n

Political unrest had already damaged Hong Kong\u2019s economy prior to Covid-19, and a 6% contraction followed in 2020, Wu told Yardi\u2019s engaged audience. But Oxford Economics is forecasting a strong recovery, with 4% growth in 2021, and then 2.5% annually out to 2025. All the macro indicators bode well, Devine added, pointing to the vaccine rollout, slowly improving retail performance and unemployment rate, as well as the city\u2019s strong financial governance framework, which remains a source of competitive advantage.<\/p>\n

Office\u2019s bumpy ride is over<\/strong><\/p>\n

Political protests had a greater impact on Hong Kong\u2019s commercial office sector than the global pandemic, Wu highlighted. Office prices fell during the protests, but the market is \u201cbottoming out\u201d and demand is returning. Green-Morgan agreed, pointing to recent deals struck at the 73-storey skyscraper at 99 Queens Road, The Center<\/a>, which were \u201cmore or less on par\u201d with 2018 prices.<\/p>\n

\u201cQuite a few multinationals have been shifting business functions to other key cities in Asia \u2013 like Singapore and Kuala Lumpur \u2013 but they are still keeping their offices in Hong Kong,\u201d Wu added. Oxford Economics expects the financial sector \u201cto continue to thrive\u201d and the tech sector, while small, will be a powerful engine for growth. Hong Kong remains \u201cthe gateway in and out of China\u201d.<\/p>\n

Residential remains resilient<\/strong><\/p>\n

While Covid-19 hurt the labour market, and unemployment currently sits at 7%, this has not affected housing demand, Wu said. Why is this? Most participants in the housing market are in the financial and other high-paying sectors, and these weren\u2019t hit hardest by Covid. \u201cThe real impact on Hong Kong was the protests. In fact, Covid has had hardly any impact on property prices, when you take a high-level view,\u201d Devine observed.<\/p>\n

Will migration, especially from those who hold British National Overseas passports, affect the housing market? Wu pointed out that the bulk of these migrants are young and footloose, but not asset-rich and were unlikely to be in the market for housing. Meanwhile land supply will remain \u201ctight \u2013 at least over the next few years,\u201d Wu added.<\/p>\n

Risk and rewards in restructured retail<\/strong><\/p>\n

Retail could take some time to recover, and Oxford Economics does not expect to see a repeat performance of the bounce back in 2003, following SARS. This marked a golden decade for retail and China\u2019s emergence as a \u201cmajor force\u201d in tourism. \u201cThis won’t happen again,\u201d Wu warned.<\/p>\n

More than 80% of inbound tourists hail from China, but the falling price of luxury goods in China has eroded Hong Kong\u2019s appeal as a shopping destination. Tourism is now at a \u201ccrossroads,\u201d Wu added. Recovery in tourist arrivals will lag other nearby cities, and this will lead to \u201cstructural change\u201d in retail.<\/p>\n

While Hong Kong has some of the highest rents in the world, and while yields have been \u201cincredibly low\u201d in recent years, some investors are beginning to take a punt on the return of Chinese tourism. \u201cThis is the big unknown,\u201d but prices are now low enough \u201cthat people are willing to take a bet,\u201d Green-Morgan added.<\/p>\n

Hong Kong stays strong<\/strong><\/p>\n

\u201cThe last two years have been a real challenge for Hong Kong, but overall investor sentiment towards the city is becoming more positive,\u201d Green-Morgan said. Despite recent declines, \u201cHong Kong is still one of the most investable cities in the region, and indeed the world\u201d.<\/p>\n

Hong Kong\u2019s performance over the last decade has shown \u201csome of the strongest price growth markets in the world\u201d, and is bested only by Tokyo, Seoul and Shanghai for investment.<\/p>\n

According to Real Capital Analytics data, a massive $50.3 billion in cash was splashed on property throughout the Asia Pacific region in the last quarter of 2020. Hong Kong\u2019s 171% increase in transaction volumes year-on-year was \u201ca big reason why the region as a whole did so well,\u201d Green-Morgan explained.<\/p>\n

A new wave of capital is coming<\/strong><\/p>\n

Real estate investment trusts came under \u201chuge pressure\u201d in 2020, posting 30-40% price declines, Green-Morgan explained. Some of that has been \u201cclawed back\u201d, although retail REITs are \u201cstill being quite badly beaten up\u201d.<\/p>\n

But Hong Kong and China will continue to be \u201cmajor players\u201d and an important source of capital around the world, with $10 billion of Chinese and Hong Kong capital flowing out in 2020 alone. Our experts pointed to Link REIT<\/a>, Asia\u2019s largest REIT in terms of market capitalization, as just one example of investors on the hunt for premium-grade assets.<\/p>\n

Private equity, pension funds and sovereign wealth funds are those with the \u201cbig war chests at the moment,\u201d Green-Morgan explained, and have real estate in their sights. Expect some \u201cbig deals on the horizon,\u201d he said.<\/p>\n

*<\/p>\n

Missed Yardi\u2019s latest Executive Briefing? Don\u2019t miss the next one! <\/em>Subscribe to our updates<\/em><\/a> to keep your finger on the property market pulse.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Is Hong Kong is poised for a real estate resurgence? Two years ago, Hong Kong was the world\u2019s third largest real estate market, trailing only New York and London. The twin challenges of protests and a pandemic have taken their toll. So last week, Yardi called in the experts for their take on Hong Kong\u2019s […]<\/p>\n","protected":false},"author":442,"featured_media":28924,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_s2mail":"yes","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[2844],"tags":[2356,34,134,40],"class_list":["post-28923","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-global","tag-hong-kong","tag-international","tag-real-estate","tag-yardi"],"acf":[],"yoast_head":"\nYardi Blog<\/title>\n<meta name=\"description\" content=\"Is Hong Kong is poised for a real estate resurgence? 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