Where to invest your millions in real estate

Realtors cited two property types that can offer higher upside potential in return.

Investors keen on putting their money into Hong Kong real estate must keep their eye on hotels because regardless of whether the border to the Mainland reopens or not, they will still gain from the asset class.

Since hotels can be transformed into long-stay apartments or co-living spaces, it can benefit from strong local demand for rental accommodation.

The rental yield of hotels turned apartments or co-living spaces could reach 3% to 4%, according to Oscar Chan, head of Capital Markets at JLL in Hong Kong.

If borders open, Chan said owners can resume the operation of their hotels and can even achieve a rental yield between 5% to 6%. 

Since the asking prices of hotels are still at a low level, Chan said it will be good to invest in the asset class now.

“With the anticipated border opening to international travellers, hotel rates and occupancy are expected to see a decent rebound in the next six months,” Reeves Yan, head of Capital Markets at CBRE Hong Kong, commented. 

Apart from hotels, retail properties also offer higher investment yield and have higher upside potential in return. According to Chan, retail properties in the neighbourhood area offer a rental yield of 4%. 

“The local demand in the retail market in these areas remains strong,” Chan said.

Yan said Central, Causeway Bay, Tsim Sha Tsui and Mongkok are also good locations for those who want to invest in commercial assets like retail and office since these traditional core locations have the “strongest recovery potential when the economy gains its momentum back.”

OKAY.com’s Tommy Kwan said Central will also become the heart of the city again once the economy improves and ex-pats return to Hong Kong.

“There will be demand again from workers wanting to live close to work. It is always a safe bet to invest in mid-levels,” he said.

Non-core areas such as Shatin is also an “ideal” investment area for office assets, especially  in the long-term because it will benefit from the improved rail link to Central, said Clayton Evans, Cushman & Wakefield’s Executive Director for Office Services, shared.

“Lantau commercial sites could also be interesting for investors with a long-term horizon, with the integration of the Bay area,” Evans added.

Most sought-after asset class

Whilst hotels are gaining popularity amongst inventors, Yan said the industrial escort remains the most sought-after asset class to invest in given its extremely low vacancy rate and tight supply.

In the next 12 months, industrial rent and value are expected to see another 5% to 10% growth.

“During the pandemic, logistic assets, warehouses and cold storage demand has increased significantly due to the growing popularity of online purchases,” Yan said.

“High quality industrial assets have been the priority purchase options by institutional investors in the last 12 to 18 months,” he added.

In terms of location, Yan said it’s best to invest in industrial assets located in such as Kwai Chung, Tuen Mun and Yuen Long  since these areas are “supported by infrastructures.”

Cushman & Wakefield’s Head of Hong Kong PRC Team, Capital Markets, Charli Chan said investors must also look into the first- and second-tier cities in East China and the Greater Bay Area (GBA) when planning to invest in logistics or warehouses or other new economy assets such as industrial parks and data centres.

“East China is a mature industrial logistics market, whilst the GBA offers an increasingly comprehensive transportation network. Both areas present a range of investment opportunities,” Chan said.

Kennedy Town is King

Whether investors are looking to invest in commercial or leisure properties, Kwan said the best location would be Kennedy Town given the abundance of future projects in the area.

Kwan said there will be new hotels, shopping malls, and luxury apartments to be built near the beginning of Victoria Road which connects Kennedy Town to Wah Fu.

“With the existing MTR and public transport network, it will certainly transform the area in near future,” Kwan said. Kennedy Town is a seven-minute MRT ride from Central.

The government’s plan to put more greenery and leisure areas along the harbour also makes Kennedy Town more attractive, according to Kwan.

“All these improvements will attract more people to live or spend time or money in the area, which will then help bring up the properties' prices in the near future,” he said.

Kwan also mentioned that Kennedy Town will be “the connecting point” of the artificial islands in Lantau and Hong Kong Island. It will likely bring more good than bad to the area which might also help improve the housing market in the area.

“Once the bridge and artificial islands are built, [Kennedy Town] will be a short distance to the airport and other to-be-developed areas in North Lantau,” Kwan said.

Whilst location is a factor in selecting properties, OKAY.com’s Flo Geiser said a good investment is one which answers the buyer’s individual needs

“Hong Kong is full of amazing properties and hidden gems. The search is very subjective, whether for investment or for self-use,” Geiser said.

“In a city where Feng Shui is as important as accessibility and convenience, it also takes a bit of luck to find the right property,” she added.