At The Same Time, Demand For Property Investment Has Risen Across The Board And This Trend Is Attributable To Several Factors

Category: Finance, Real Estate.

Hong Kong s strategic location, well- developed infrastructure and services, along with the city s free flow of information and low and simple tax system, have made Hong Kong a world- class city for more than a century.

Such a huge influx of foreign investment generates great demand for real estate, providing an immense range of opportunities for property investors. Hong Kong being an international financial and business hub, dozens of overseas companies have set up headquarters here as a base for their regional operations in the Asia- Pacific region. Hong Kong also serves as an important gateway to the country. In the wake of China s accession to the WTO and the signing and phased implementation of CEPA, it is evident that Hong Kong s role as an international trade and business centre has been strengthened and the closer economic integration of Hong Kong with the Mainland is boosting Hong Kong s property investments across the board. China is bringing numerous business opportunities to the territory. At the same time, demand for property investment has risen across the board and this trend is attributable to several factors.

Also, institutional funds became active in expanding their property portfolios, given the high levels of investment liquidity in the property market and the perceived promise of monetary return. One was the surging positive sentiment in the investment market at the city s continuous economic growth and upbeat economic outlook. The limited supply of premium properties across the board also triggered substantial investment from buyers who had previously adopted a waitand- see approach. Against the background of Hong Kong s continuously strong economic fundamentals and positive outlook, several phenomena were observed in the property investment market. Mounting inflationary pressure, amid a weak US dollar and renminbi appreciation, also made real estate an attractive investment alternative to capitalise on possible price appreciation in the foreseeable future. First of all, especially those at, luxury residential properties the high- end of the range, were sought after by both investors and end users.

The strong performance of the market was largely driven by exuberant investment sentiment coming from investors optimism over the prospects for luxury residential properties, in light of limited supply, as well as from the increasing number of end users who enjoyed huge profits in the recent local stock market. This caused the luxury residential market to outperform other property sectors in terms of transaction volume, with several record- breaking unit prices seen in recent transactions. The government s satisfactory land sales results of two luxury residential plots in Tai Po in March 2007 with one slot s unit land price reaching HK$ 6, 109 per sq. ft. , a record high for sites being sold within the New Territories, provided a further psychological boost to the market, triggering additional demand from both investors and end users. Secondly, especially in the, quality office properties CBD area, were in huge demand, pushing up their capital values and rentals to record highs. The relative scarcity of luxury housing stock available in the market, constrained purchasers, however choices, especially on brand new luxury houses in traditional luxury residential districts, which in turn shifted a portion of demand to high rise apartments, making them increasingly popular in the luxury residential sector. Given that the extremely tight supply condition will persist over the near term, while demand from the expanding financial and professional services sectors is likely to grow, investors and end users started extending their interest to quality office buildings in non- core commercial areas, resulting in a significant rise in en bloc transactions of Grade B office buildings. These funds were seen widening the scope of the types of assets they would consider acquiring, to include not only prime offices but retail properties as well.

Thirdly, the retail property investment market received strong interest from a group of new players: foreign institutional funds. Lastly, huge demand for industrial real estate was seen from local investors and end users as well as foreign funds, fuelled by robust re- export activities, investors optimism over the local economy and higher yield rates of industrial properties compared with those of other property sectors. On the other hand, due to the lack of high quality industrial premises, most transactions in 2007 were triggered by local investors instead of overseas buyers, as the latter found it increasingly difficult to acquire their targeted large- scale premium industrial premises. The substantial demand, combined with tight supply of industrial premises, made landlords generally speculate that there is room for further upward movements in price and rental, making them stand firm in quoting prices and rents.

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