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HONG KONG: Mainland Chinese investors are scouring Hong Kong’s commercial real estate market for bargains after prices plunged 30%, signaling a new wave of demand following last year’s anti-government protests that kept investment activity borders.
Real estate agents hope that the influx of Chinese capital, which has helped Hong Kong become one of the most expensive real estate markets in the world, could once again prop up the sector as China recovers from the COVID-19 pandemic and is ready to display liquidity.
In August alone, mainland buyers snagged at least two office towers and a hotel building worth 4 billion Hong Kong dollars ($ 516 million) in total, according to agents and documents.
“Most of the recent high-value construction deals were bought by Chinese investors; their number has really grown in the third quarter,” said Reeves Yan, director of capital markets at CBRE Hong Kong.
“They are looking for bargains … and they have confidence in Hong Kong for the long term.”
The spike in demand coincides with the imposition of a national security law in Hong Kong on June 30, which authorities in Beijing and the financial center have said is necessary to ensure its stability and prosperity.
“We look forward to seeing more mainland Chinese investors come to buy land,” said Dennis Cheng, senior director of sales at Ricacorp (CIR) Properties.
“If Hong Kong becomes more stable in the coming months after the national security law, we expect more companies from the mainland to open branches here, and that will help the office sector to recover.”
The move by Chinese investors stands in contrast to foreign investors, who are holding off on growing concerns about the city’s future. Critics of the legislation say it has pushed the former British colony onto a more authoritarian path after months of sometimes violent democratic protests last year.
“Foreign investors are still absent. I spoke with two foreign funds recently who said they will not consider Hong Kong at this time because the political risks are relatively high now,” said Daniel Wong, CEO of Midland IC&I.
READ: Fearful of China’s new security law, Hong Kong residents fight for safe havens
EARLY SIGNS
In July, state-owned China Mobile and a consortium led by major Chinese developer Vanke bought a parcel of land each for HK $ 5.6 billion and HK $ 3.7 billion, respectively. They were the first mainland Chinese companies to win public tenders since January.
Colliers says he expects mainland capital to become “the next wave of demand” in Hong Kong’s rental and investment markets, backed by cross-border finance initiatives in equity and wealth management, and the city’s large capital pool. for fundraising.
China called on its largest state-owned companies to take a more active role in Hong Kong, including increasing investment and asserting greater corporate control to help cool last year’s political crisis, Reuters reported last year.
However, it is unclear whether Beijing is driving the latest surge in investment, because while some of the buyers are government-backed, many of them are private investors.
But the city saw a drop in deal volume amid the unrest and pandemic and has yet to witness an increase in investments on the continent comparable to a few years ago.
READ: Comment: To save its markets, Hong Kong needs to trust China
“There are early signs of a return in demand from mainland China,” Colliers said in a recent note.
Chinese investment accounted for 39 percent of total commercial real estate transactions in Hong Kong so far this year, up from 19 percent for all of 2019, Colliers said.
CBRE’s Yan expects the commercial real estate market to bottom out soon as transaction volumes accelerate in the fourth quarter. However, he warned that office and retail prices will remain under pressure for another 12-18 months as the economy slowly recovers.
