Combat low rates of residential investments with alternative property

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Hong Kong is infamous for property prices being hard to shoulder. If one was to invest in a flat for the purposes of collecting rent, the return rates don't indicate that this would be considered a wise investment. As a recent example, an investor bought a unit at the new Kowloon East project, 1 Kai Tak, for HK$10.8 million, but due to an oversupply of rental units, eventually they could only rent it out at HK$16,000 per month, so the rental return rate was only at 1.8%. This being said, the general public are still tirelessly snapping up new properties on the presumption that “if I don’t buy today, it’ll be even more expensive tomorrow”, clinging on to the belief that they can sell it off at a higher price in the future.

However, these low return rates have stirred up new notions in other investors who wish to find new channels for their cash flow. According to JLL's research data, investors are looking for alternative investment opportunities, including student or elderly accommodation, cohabitation spaces, self storage facilities, and parking spaces. Apart from Hong Kong, other locations in the Asia-Pacific region, such as mainland China, Japan, and Singapore, are also displaying considerable potential opportunities in alternative investments.

Reports indicate that due to the extensive changes in the Asia-Pacific region, such as urbanisation, aging population, increase of income per capita, and popularisation of technology, the future vista for alternative investments looks promising, with continued growth being likely. The estimated population number for the Asia-Pacific region by 2027 exceeds four billion; this could be beneficial for the growth of education or self storage sectors. Within the next ten years, the region is set to see 5.6 billion more Internet users, and with the rapid increase of smart phones and online data storage, the demand for services like data providers will see an upsurge as well.

The elderly demographic in Asia-Pacific is to increase to 1.46 billion in the next ten years, which will drive the demand for elderly accommodation and nursing homes. In Hong Kong, the number of residents in nursing homes have risen from 61,000 in 2010 to approximately 70,000 at present. As demands continue to rise so will housing prices—this might well spawn more unexpected alternative investments.