Hong Kong would surpass New York as top destination for mainland real estate money, Colliers says

Hong Kong is likely to surpass New York City as the top destination for mainland real estate investments this year, backed by a record-high level of transactions in the first quarter, says Colliers International.

Total transactions of mainland investments in Hong Kong real estate in the first three months of 2017 surged 213 per cent to HK$36.1 billion, compared with the year-earlier period, the real estate service company said.

It attributed a number of factors to have contributed to the uptrend including the depreciation of renminbi and slower economic growth in China, which compelled investors to seek better capital value offshore.

Last year, China’s real estate investments in Hong Kong totaled more than HK$41.2 billion dollars, trailing behind New York City’s recorded HK$44.4 billion, according to Real Capital Analytics data that was cited by Colliers.

“Hong Kong could outstrip New York City as the most popular recipient for PRC real estate investments in 2017,” said Antonio Wu, deputy managing director of capital markets and investment services at Colliers International.

Wu added that the Trump administration would be extra cautious in approving foreign investments into the US, which will benefit Hong Kong.

Sydney and London were ranked third and fourth most popular destinations for Chinese real estate investments in 2016, according to Colliers.

While Sydney saw an increase in investments to HK$28.3 billion from China last year, Chinese investments into London dipped to about HK$13.7 billion

Wu said that Brexit had played a role in diverting Chinese investments out of the UK, and some of that capital flew into Hong Kong.

He said that office buildings were a popular target among mainland corporate investors, who saw acquisition of the buildings and strata-title offices as a hedge against future rent increases.

Daniel Shih, director of research, said, “PRC investors have been actively looking for trophy assets and en bloc office sales, with the top seven en bloc trades accounting for 82 per cent of the total transaction volume between January 2012 and March 2017.”

While Wu would not address the question of whether mainland investors were responsible for inflating property prices, he conceded that mainland investors tended to be more aggressive and may be willing to sacrifice profit margin in exchange for recognition among local players.

But he added that if the government could increase the land supply, prices would stabilise.

Colliers predicts that the mass residential property prices will grow by eight per cent this year and luxury property prices will grow by three per cent.

Office property prices in Central and Admiralty will rise by over 10 per cent.

With such increases in the core business areas, Shih said that more companies were considering moving to decentralised locations including Island East, Kowloon East and Wong Chuk Hang.

He said 90 per cent of the new office supply between 2012 and 2017 is in decentralised locations.