Real estate investments plunge to lowest in a decade

Investment volumes fell 57% YoY in Q4 2019.

Real estate investment volumes in Hong Kong plunged to their lowest level in a decade in the Q4 2019, falling 57% YoY to less than $38b (US$5b), according to the Asia Pacific Capital Trends 2019 report by Real Capital Analytics.

The political unrest that erupted in June pummelled deal-making and investor confidence and dragged down the total for the whole year as well. For 2019, deal volume was down 42% YoY compared to the previous year, totalling only $118.06b (US$15.2b), the report noted.

But even without the unrest denting business appeal, it still would’ve been normal for Hong Kong to experience a slowdown as it is expected to follow this trajectory.

“Hong Kong had two exceptionally strong years in 2017 and 2018 when annual deal volumes exceeded US$25 billion. Such momentum was ultimately unsustainable as the market does not have the same scale of commercial stock compared with other global cities, so the trajectory of normalisation seen in 2019 was a matter of ‘when’ rather than ‘if,’” said David Green-Morgan, RCA’s Managing Director.

“That said, with the demonstrations exacerbating the slowdown and few big deals in the pipeline, there is a real chance that activity in Hong Kong could sink well below its longer-term average in 2020,” he added in a gloomier note.

Green-Morgan expects the slowdown in Hong Kong’s investment activity to continue through the first-half of 2020.

On the COVID-19 outbreak, RCA noted that it is still too early to judge what the impact of the coronavirus will be on real estate investing in APAC.

In Asia Pacific, total investment volume dipped 8% YoY to $1.23t (US$158.5b) in 2019, although this is still the third highest level on record. Cross-border transactions also picked up momentum and market share, with total cross-border investment volume in the region reaching $442.74b (US$57b) during the year. Investor pullback is concentrated in select smaller markets, whilst larger country markets remained unscathed due to investors flocking to the largest and most liquid ‘safe haven’ metropolises.