Hong Kong’s commercial property investors expect relaxed mortgage rules to kick start buying activity
- Bridgeway Prime Shop Fund Management plans to speed up its HK$100 million acquisition plan in core tourist belts following the credit easing
- While the credit-easing policy has had a positive impact on sentiment, some market observers say the economic outlook and Covid-19 continue to cast a shadow
Bridgeway Prime Shop Fund Management, a Hong Kong-based retail property investment fund, said it plans it to speed up its HK$100 million (US$12.9 million) acquisition spree in Hong Kong’s core tourist belts of Mong Kok, Tsim Sha Tsui and Causeway Bay following the credit-easing measure.
“We are in advanced talks to buy two shops and [hope] to close the deals quickly,” said founder Edwin Lee, whose fund owns 15 street shops valued at HK$370 million.
He said the easing of credit policy has had a positive impact on market sentiment. “Over the weekend, I received numerous calls from my business partners showing interest in buying shops.”
The measures only apply to offices, industrial factories and retail premises, which have seen major price correction as the economy shrank in four straight quarters through June.
The volume of retail property transactions fell 16 per cent year on year in the second quarter to HK$4.42 billion, according to Colliers International.
The major factors behind the thin transaction volumes were weakening rents and bleak economic outlook, said Marcos Chan, CBRE’s head of research for Greater Bay Area and Hong Kong.
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“Rent and mortgage affordability remains the biggest concern for some owner occupiers as their business outlook remains cloudy. Any bank measures that could help to ease property owners’ mortgage burden will be welcomed by property owners and investors,” Chan said.
Other market observers felt the mortgage easing measures would have a limited impact on the commercial property market, while others pointed to the shadow cast by the Covid-19 pandemic.
Joseph Tsang, chairman and head of capital markets at JLL in Hong Kong, said that the financial situation of investors or end users stepping into the market would be relatively strong, adding that the 10 per cent increase in loan-to-value ratio will not make a significant difference in lifting transaction volumes.
“Nothing happened actually over the weekend,” Tsang said. “The market did not react to the latest relaxation measures.”
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Still, Bridgeway’s Lee said that last week’s easing of mortgage lending for commercial property points towards the possibility of further relaxations like a cut in stamp duties, which could lower transaction costs further.
According to the HKMA, commercial property prices have slumped by 10 to 15 per cent between the recent peak in May 2019 and June this year.
“It would be difficult to buy prime properties at steep discounted prices if we wait for the return of mainland tourists,” Lee added.