Hong Kong’s property investments recover but still below pre-COVID level

Real estate investment volume climbed 79% in the second quarter.

Investment activity in the real estate sector picked up in the second quarter (Q2) of the year, but remains below its pre-pandemic level, the Real Capital Analytics (RCA) reported.

Investment volumes were up 79% to US$2.7b, compared to Q2 2020; whilst the half-year volumes reached US$4.3b, reflecting a 62% increase from the same period last year.

The RCA, however, noted that it “still substantially below the city’s pre-pandemic level."

“Hong Kong’s office and retail price declines have finally bottomed out, with retail yields even beginning to track back downwards in 2021,” Benjamin Chow, RCA’s head of Analytics for Asia, said in a statement.

“However, investors remain cautious about both these sectors, diverting their attention to the industrial sector instead.”

Chow said that, virtually, all the overseas money flowing into Hong Kong went to industrial properties. The investment volume in the sector totalled US$1.5b in Q2 2021, the highest ever tally for a single quarter.

The industrial sector saw an 82% rise to US$13.4b during the quarter across the Asia Pacific market. It followed the office sector which recorded investments amounting to US$13.6b.

Deals in the retail sector, meanwhile, doubled to US$9.8b in the quarter, reflecting a 104% growth.

The real estate investment market in the region sustained its recovery with steady sales growth in Q2. The RCA noted this is the third consecutive quarter that volumes saw a year-on-year increase.

“The recovery in Asia Pacific’s real estate investment market extended to nearly all the major countries, except for Japan. While the magnitude of transaction volume growth may seem modest, it is worth remembering that activity did not plummet in the Asia Pacific region, as seen elsewhere in the world in 2020,” David Green-Morgan, RCA’s managing director for Asia Pacific, said.

Investment activity in the region hit US$40.3b in Q2, increasing 11% from the same period in 2020. For the first half, activity climbed 8% to US$77.6b.