Chinese demand for HK property climbs

Hong Kong

MAINLAND Chinese are returning to Hong Kong's real estate market, snapping up millions of dollars in land and office blocks, bolstered by China's support for Hong Kong's status as an international financial hub.

Chinese developers have won six of the 13 land sites in government tenders since July last year, accounting for about 60 per cent of the total spent for the parcels, according to a report released on Wednesday by Colliers International.

Chinese investors also made up almost all of the cross-border property deals in Hong Kong, the report showed.

The active investment in Hong Kong real estate from state-owned and private businesses is a vote of confidence in the city at a time of growing concerns for Hong Kong's diminishing freedom and lacklustre economy.

China will provide support for its financial institutions that are doing business in Hong Kong, the China Banking and Insurance Regulatory Commission said in a statement last weekend.

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The regulator also stressed that the city's status as an international financial centre would not be weakened by China-US tension.

"We believe mainland firms and capital will continue to seek opportunities, becoming the next wave of demand in the Hong Kong leasing and investment markets," Colliers said in the report led by Rosanna Tang, its head of research.

The company cited China's resilient economy, cross-border financial initiatives in stock and wealth management, Hong Kong's capital pool for fundraising, and the Greater Bay Area plan as the drivers.

The most notable land purchase in the year was by state-owned China Mobile, which spent a record HK$5.6 billion (S$987.9 million) for an industrial site in the Sha Tin area in July. The firm paid 55 per cent more than the second-highest bidder, government data showed.

Ping An Insurance Group and China Cinda Asset Management were the top two buyers by total acquisitions in Hong Kong's commercial property market over the last 12 months, according to Colliers.

Mainland Chinese capital has made up 98 per cent of the inbound real estate investment in 2020, up from 61 per cent for all of 2019.

Chinese firms represent 11 per cent of the grade A office leasing deals signed in the first half of the year, with a majority of the companies coming from the banking and finance industries, said Colliers.

CMB International Capital Corp, China Minsheng Banking Corp and Orient Finance Holdings expanded their office space in Hong Kong this year, while some foreign players surrendered space in the city.

However, active investment from Chinese companies has not turned the market around. Office and shop transaction volume and value slumped 41 per cent and 55 per cent respectively in the first half of 2020 compared with the same period last year, data from Savills showed.

The Hong Kong government recently revised its 2020 forecast for the economy to contract a record 6-8 per cent because of the pandemic and rising trade tension. The city has been in recession since the second half of 2019 due to sustained protests before the coronavirus. BLOOMBERG