Investments in en-bloc residential buildings hit $4b

Mainland developers are gaining interest in such projects.

The market has seen more investors, both local and PRC developers, showing interest in acquiring brand-new en-bloc residential properties. Investment in turn-key residential buildings so far this year totaled at least HKD 4 billion, according to JLL’s latest Hong Kong Residential Market research released today. Against an expanding supply pipeline and an increasingly competitive environment, we expect more developers of residential developments to consider an en-bloc exit strategy, instead of strata-titled sale, in order to realise gains more swiftly.

A total of four en-bloc residential buildings changed hands so far this year. Investment in turnVeteran investor Tang Shing-bor reportedly purchased a turn-key en-bloc residential project “T Plus” in Tuen Mun comprising a total of 356 units for HKD 1.2 billion. According to market sources, “T Plus” will likely be leased out as student dormitories—with unit size ranging from 128 to 250 sq ft.

With a handful of large-scale residential projects being launched and about 10,000 primary units absorbed in the first half of the year, the market has seen a slowdown in the sales velocity of new projects in recent months. Given increased interest in en-bloc projects, some developers resorted to sell their developments in bulk to realise gains for other investments in future.

Henry Mok, regional director of Capital Markets at JLL, said: “En bloc residential developments could be one of the acquisition targets for Mainland developers, given their desire to diversify their investments and increase their market share in Hong Kong. Whilst it saves them time and resources from having to build ground-up developments, it is unlikely they would pay a premium purchase price for these en-bloc properties, in order to still be able to capitalise on their future exit plans.”

Ingrid Cheh, associate director of research department at JLL, said: “Aside from the interest from Mainland developers, the demand from both local investors as well as investment funds for en-bloc residential properties could also grow for developing some niche housing products, such as elderly homes, student or co-living accommodation. In view of the changing demographics of Hong Kong’s population and prices now at record-high levels, the market should see more opportunities arising from developing rental housing options that can cater for a cohort’s specific needs.”