Hong Kong investors on international developers' radar

Trident Property Parners

Look at the event board in the lobby of any major hotel in Central on any given weekend and you’re just as likely to see an overseas property showcase and sale as you are a wedding — quite possibly more so. Long before Hong Kong was seen as a gateway to and from China, the colony and then SAR was (and is) a banking hub, with an intensely internationalised business community and an outward-looking local population that remains one of the savviest investor markets in the world.

Recent research by Hong Kong-based investment consultancy IP Global revealed that the number of Hongkongers considering overseas investment in the next calendar year almost doubled from 2016. Throw in low home ownership rates in Hong Kong and you have a recipe for a prime international market. “First, you have scores of wealthy mainlanders buying properties in Hong Kong [who] perceive Hong Kong as a safe ‘offshore’ wealth accumulation centre. Next, we all recognise Hong Kong’s status as a financial hub globally, thus attracting expatriates from all over the world, contributing to both rental pressures and supply availability. Lastly, of course, many Hongkongers have yet to fulfil their ambitions of homeownership,” theorises Infinity Capital Group’s CEO Jonathan Cheng. “All of these are key contributors to demand and desire for property purchase in Hong Kong — hence making it such a popular destination for overseas developers.”

High liquidity among a property-positive population will keep developers dropping into the SAR, particularly when the city also forms a crucial step in regional marketing plans. Hongkongers, “Have a clear understanding on the benefits of property investment and they have the financial ability to commit. Property investment or even home ownership is becoming almost impossible for some Hong Kong residents, but now they have the option to own properties outside the country,” echoes Perth-based Trident Property Partners Director Lily Chong.

You might be interested in:
>> What HK$7 million could buy you overseas
>> Risks to consider when buying property overseas

Infinity Capital Group

Historical ties have contributed to making Hong Kong a favourite destination among UK developers for years. Berkeley Group, Taylor Wimpey, Barratt, Galliard, Ballymore and Canary Wharf Group are just a handful that have recently launched Asian sales in Hong Kong. But in the past few years, developers from other parts of the world — Australia (Crown, Lendlease), Canada (Concord Pacific, Tridel), the USA (Millennium Partners), the UAE (DAMAC), Thailand (Sansiri) — have opted to target Hong Kong buyers more aggressively, a trend carried on from the late 1980s and pre-handover uncertainty. On the heels of globalising Abenomics and a relatively weak Yen, the latest player to make a splash is Japan. It’s a market Hongkongers are responding to. “[Hongkongers] realise that rental yields are not great in Hong Kong and they look overseas — for affordability and for better returns,” notes Cheng. “Our developments in Japan have been very popular. Tellus Niseko, for instance, has received many expressions of interest… and our private equity firm — LC Capital — also structures products which allow investors to enjoy diversified, healthy and stable returns.”

>> Developer Ballymore regenerates London's City Island
>> Canary Wharf's second residential project

Widely considered savvy investors, that same kind of savvy makes Hongkongers a demanding lot too. Investors in Hong Kong are looking for value, creative design, solid capital growth and rental yields — a tricky proposition in low interest rate environments with liquidity chasing returns and pushing prices up as Cheng sees it. “That is why we work with many investors to offer structured products which allow them to diversify their investment monies into real estate assets across the region, while keeping the capital sums and lock-in periods manageable. These have been proven to be very popular.” Trident’s Chong points out that in addition to a good bargain and great discounts, just as essential for Hong Kong investors is after-sales service, which can include professional property management. However, there’s a limit to risk tolerance and creativity right now as Chong sees it. “Many [investors] like the idea of secured returns in the form of rental guarantees or cash back,” she says. “Hong Kong people are more comfortable with countries and cities that they are familiar with, even though some of these properties are overpriced and/or have poor rental yields. They are yet to feel confident in exploring and investing in cities with strong potential to grow.”

>> Previous issue:Investment opportunity at Royalston, South Africa

>> Next issue: New World Development breaks out a new image for the public