Mainland Chinese firms plough their cash into Hong Kong property as souring foreign ties put US, Australia, UK out of the picture

In the first half of the year, mainland Chinese investment in Hong Kong real estate accounted for almost all cross-border investment, according to Colliers

‘Given the current tensions between China and some western countries, in particular the US, a lot of mainland capital will prefer to invest in Hong Kong instead,’ said Antonio Wu of Colliers

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Commercial buildings in the Admiralty district of Hong Kong. Photo: EPA-EFE

Published: 7:00am, 1 Sep 2020Updated: 3:13pm, 5 Sep 2020

Capital from mainland China is likely to be the main source of investment in Hong Kong property in the foreseeable future, analysts said, as Chinese businesses face deeper scrutiny elsewhere amid worsening relations with a number of western countries, particularly the US and Australia.

In the first half of the year, mainland Chinese investment in Hong Kong real estate picked up and accounted for almost all cross-border investment versus 61 per cent of the total a year earlier, according to the latest report by property consultancy Colliers. Mainland Chinese also accounted for 11 per cent of total leasing deals on premium office space in Hong Kong.

In August, mainland buyers bought at least two office towers and one hotel building worth HK$4 billion (US$516 million) in total, according to a Reuters report which did not name the assets.

The trend is likely to be sustained. Since July last year, six of 13 sites tendered in government land sales were awarded to mainland Chinese developers. Out of 1,541 regional headquarters in Hong Kong, 216 or 14 per cent were from mainland China, up by 125 per cent over the last decade.

The appetite of mainland Chinese for Hong Kong assets comes against the backdrop of muted interest in the city’s property market, with total investment falling by 70 per cent in January to June, according to data from Real Capital Analytics (RCA).

“Given the current tensions between China and some western countries, in particular the US, a lot of mainland capital will prefer to invest in Hong Kong instead,” said Antonio Wu, deputy managing director, capital markets and investment services, at Colliers International.

Washington has rolled out various measures that made it more difficult for mainlanders to acquire assets in the US including a new regulation that expanded the Committee on Foreign Investment in the United States’ scope to the review of even non-controlling stakes in real estate. In 2018, the US also imposed additional restrictions on foreign investments in sensitive sectors.