Yields dip 'likely to dampen HK investment'

PUBLISHED : Wednesday, 11 January, 2012, 12:00am
UPDATED : Wednesday, 11 January, 2012, 12:00am


Investment in the Hong Kong property sector is likely to dip this year because returns on assets have fallen to unattractive levels, according to consultant DTZ.

Last year a rise in property prices drove yields in most sectors downwards, Alvin Yip, DTZ's co-head of investment, China, said.

Investors were now likely to put further moves on hold in view of the low returns, the gloomy outlook for the global economy and tight liquidity, he said.

DTZ figures show a decline in investment demand in the sector last year. The number of major deals (valued at more than HK$100 million) hovered at a high of 187 in the first half of the year, before sliding to 92 in the second half.

By the end of the year transaction volume was 279 major deals, a year-on-year decline of 7.9 per cent on the 2010 numbers. The total value of investments made during the year was HK$89.21 billion, down 3 per cent year on year.

DTZ said the value of investments surged from the first quarter to the second but the third quarter proved a turning point for investor sentiment following the outbreak of the euro-zone debt crisis in the summer. There was a further drop in total investment values in the fourth quarter.

The year ended with both retail properties and offices offering similarly low yields of just 2.9 per cent.

Looking ahead, investors, including foreign funds, would continue to look for opportunities in Hong Kong, but they were likely to make a move only if property yields increased from their present low levels, according to Yip.

Since landlords with strong holding power were in no rush to sell, and buyers preferred to wait because of the low yield, activity was likely to be subdued.

'Due to a lack of incentive from either the landlord or the buyer to enter into a transaction, major property investment deals will be under pressure in 2012 - except for properties with unique attractiveness such as prime retail or value-added potential,' Yip said.