Meanwhile, China’s central bank has been on an easing trajectory, with its latest decision in February cutting 25 basis points from banks’ five-year loan prime rate (LPR), the largest shave since the LPR was designated as the main rate benchmark in 2019.
“From the commercial real estate perspective, the appetite is quite a tale of two countries: foreign investors continue to look for opportunities in Japan but remain very silent when it comes to China,” said Henry Chin, global head of investor, thought leadership and head of research for Asia-Pacific at CBRE.
Flows of foreign money into commercial property reflect the shift from China to Japan.
In 2019, foreign investment in Chinese commercial real estate reached US$12.3 billion, almost double the US$6.2 billion invested in Japan, according to CBRE’s tracking of all transactions worth US$10 million or greater. By 2021, this gap had narrowed, with China getting US$10.1 billion and Japan US$6.5 billion. In 2022, the two countries received roughly equal foreign investment, US$8 billion for China and US$7.7 billion for Japan. Last year, the tables turned, with Japan taking in US$5 billion and China getting just US$3.2 billion.
China’s share of total foreign investment in property declined from 38 per cent in 2019 to just 8 per cent last year, while Japan’s has been relatively steady at 21 per cent in 2019 and 17 per cent in 2023, according to data cited by JLL.
“Foreign investor appetite could not be stronger for Japan at the moment,” said Pamela Ambler, head of investor intelligence for Asia-Pacific at JLL. “Despite the recent BOJ announcement, Japan is still the only market with accretive cash-on-cash returns. In fact, monetary policy may drive domestics to look overseas, opening up opportunities for foreign investors to enter the market.”
Japan slips to world’s fourth-largest economy, behind US, China and Germany
Japan slips to world’s fourth-largest economy, behind US, China and Germany
Hong Kong-based private equity fund Axe Management Partners is one investor making a major bet on Japan’s commercial property prospects. In March, it completed an acquisition of three hotels in Osaka for 10.7 billion yen (US$71 million).
Currently known as WBF Honmachi, WBF Kitasemba East and WBF Kitasemba West, the hotels have a total of 500 rooms. They are slated to relaunch in the last quarter of the year as part of Garner hotels, a brand under UK-headquartered IHG Hotels & Resorts. They will be the midscale brand’s first hotels outside North America.
“It’s very easy to see that this is an attractive market,” said Gary Kwok, founder and CEO at Axe Management. “In terms of the interest rates, it has a positive carry, and that obviously attracted a lot of the foreign capital looking for a positive yield. And in our view one of the key asset classes is hospitality.”
Axe Management, which has earmarked more than US$85 million for the acquisition and renovation, is aiming for a return of as much as 20 per cent on the investment, Kwok said.
Hong Kong, mainland China office-leasing outlook bleak, CBRE says
Hong Kong, mainland China office-leasing outlook bleak, CBRE says
As for China, opportunities are still present, especially with a number of distressed assets available in the market, said Sam Lau, Axe Management’s founder and managing partner.
“The market is very huge, and China is a place that we can never ignore,” he said. However, the company is being more selective about investments there, he added, looking into hotels, retail and student housing in first-tier cities but avoiding residential properties and offices.
Both Chin of CBRE and Ambler of JLL forecast continued strength in the Japanese commercial property market.
“Japan has strong fundamentals with its strong, stable and transparent economy,” Ambler said. “The yen is also depreciated against major currencies such as the US and Singapore dollars and has interest rate differentials to other countries, which leads to favoured lending terms and yield differences. There are also clear exits in Japan, and it is also a relatively more liquid market.”
Foreign investors, meanwhile, are likely to have a limited appetite for China for some time, Chin said.
China property: rate of decline in investment slows, official statistics show
China property: rate of decline in investment slows, official statistics show
“Japan and mainland China are in different cycles when it comes to commercial real estate,” he said. “We continue to see the growth in Japan while China is currently going through repricing with limited leasing demand.
“The Japanese economy continues to outperform, as the country has experienced real wage growth … However, the Chinese economy faces challenges while the unemployment rate continues to be on the high side.”
Numerous apartments in Macau, several of them freehold, stand next to its world-class casinos.
Macau Real Estate’s Potential
There’s no stock exchange here. As such, buying property in Macau is the only method of investing in the city besides starting a company here.
But you still won’t have the same variety of real estate options as you would in Hong Kong or Shenzhen. Gambling and tourism are Macau’s two major industries. They don’t really have a tech, finance, or manufacturing sector.
Worse yet, a tiny population of under one million makes catering to the city’s domestic consumer market impractical. Foreigners who start investing in Macau generally either start a business or buy real estate.
Here’s the good news: Macau’s economy is starting from a far lower base than Hong Kong and isn’t quite as developed. GDP per capita in Macau is lower while tourist arrivals are rising by over 10% per year.
Investing in Macau real estate gives potential for return because of this. Foreign buyers should understand that most opportunities in Macau rely on the tourism and gambling sectors though – whether directly or indirectly.
Macau’s Connectivity: A Main Growth Driver
Macau and Hong Kong are also now more connected than ever. The two cities were previously separated by 62 kilometers of water. You had to either take a helicopter or an hour-long boat ride to travel between them.
Recently, one of the longest bridges in the entire world was finished. This links Macau and Hong Kong by road, allowing you to simply drive between them now.
The bridge gave more than 7 million people in Hong Kong easier access to Macau when it was finished several years ago.
Plans for connectivity in Southern China don’t stop there. A series of trains, highways, bridges, and roads will further link Macau and Hong Kong to mainland China.
Shenzhen and Guangzhou – two megacities of approximately twenty million people each – are right across the border from Macau.
Over 80 million inhabitants live in the Pearl River Delta region as a whole. Even if it just leads to more tourists and gamblers, increased connectivity will surely help boost Macau’s economy in the long-term.
To summarize, expect to pay a minimum of US$500,000 if you wish to start a company or buy real estate in Macau.
Investing in Macau’s property market could pay off if you’re active, or have spare cash and are willing to cope with a severe lack of available options.
FAQs
“The effect [of the move] is more business to our frontline workers in the real estate agency industry as a whole,” Sui said in a television interview. “We absolutely welcome this.”
The cooling measures were scrapped with immediate effect on February 28, ending the imposition of a buyer’s stamp duty designed to target non-permanent residents, a stamp duty for second-time purchasers and a special stamp duty aimed at homeowners who resold their property within two years.
Former chief executive Leung Chung-ying first imposed the curbs to rein in property speculation and reduce external demand.
Property agency giant Midland Realty said the number of transactions at the city’s 35 largest housing estates hit three figures for two consecutive weeks after the measures were lifted, the highest level in nearly two years.
The transaction volume was more than 1.5 times higher than last year’s average of 54 cases per week, the agency said.
“The trading performance of new properties has been brilliant and the trading volume of secondhand ones has further improved,” a Midland spokesman said last Monday.
The number of transactions at South Horizons in Ap Lei Chau and Tai Po Centre in the New Territories both increased by 400 per cent, respectively, securing 10 and five deals between March 4 and 10, up from just two and one the previous week, Midland said.
HKMA asks banks to exercise caution when lending for ‘confirmor sales’
HKMA asks banks to exercise caution when lending for ‘confirmor sales’
Uptown East in Kowloon Bay, a new project, sold its first round of 336 flats on Sunday after it received 6,899 registrations, an oversubscription of more than 19.5 times.
Siu warned the average number of complaints might increase with the surge in deals and advised prospective homebuyers to consult banks before they made any decisions.
Buyers should pay attention to potentially illegal advertisements that provided misleading information by methods such as mixing up the saleable area – the actual size of a home – and the gross area, which includes common areas such as lobbies, partitions, mechanical shafts and ducts.
“[Property agents] should never tell buyers how much the lenders can offer for the mortgage,” Siu said. “Some banks don’t provide mortgages for properties such as village houses.”
He also told homebuyers to find out whether a house might not be eligible for a mortgage because of a past death at the property.
“There is no complete definition of a haunted house,” Siu said. “The most proper way is to ask a bank first about whether someone died there or jumped to their deaths there.”
The authority issued a circular last December on the sale of incomplete properties in mainland China and overseas, requiring real estate agents to engage a lawyer based in those jurisdictions to provide legal advice covering due diligence and key information on the seller and the property project.
The new measure will take effect on July 1 and agents who violate the rule may be subject to disciplinary action, with penalties ranging from a reprimand and fine to having their licence revoked.
Hong Kong to take more cautious approach to land sales, development chief says
Hong Kong to take more cautious approach to land sales, development chief says
As the mainland’s property market has lurched from crisis to crisis, with some major developers mired in debt, it has become increasingly common for construction projects to be left unfinished.
Advertisements for properties in places such as Britain, Australia and Japan are also often found in the city.
Siu said that the new arrangement ensured buyers could seek legal recourse through a local lawyer if they encountered misleading information from a seller.
He also reminded homebuyers that some places might not protect buyers of yet-to-be completed property as well as Hong Kong did. He suggested they contact a licensed agent in the city to help handle the purchase.
Authorities implemented a tenancy control mechanism dedicated to subdivided flats in 2022 to offer four-year security of tenure for the tenants and restrict the rate of rent increase on tenancy renewal to no more than 10 per cent.
Siu said the authority had fielded 13 complaints about real estate agents’ breach of the control regulations, of which four were under investigation, by the end of 2023.
The remaining nine cases could not be continued because of insufficient information, he added.
Sui also warned real estate agents to ensure they complied with the control mechanism as infractions could attract punishments ranging from a fine to licence revocation.
“The effect [of the move] is more business to our frontline workers in the real estate agency industry as a whole,” Sui said. “We absolutely welcome this.”
The cooling measures were scrapped with immediate effect on February 28, ending the imposition of a buyer’s stamp duty designed to target non-permanent residents, a stamp duty for second-time purchasers and a special stamp duty aimed at homeowners who resold their property within two years.
Leung Chun-ying imposed the curbs to rein in property speculation and reduce external demand when he was chief executive from 2012 to 2017.
Property agency giant Midland Realty said the number of transactions at the city’s 35 largest housing estates hit three figures for two consecutive weeks after the measures were lifted, the highest level in nearly two years.
The transaction volume was more than 1.5 times higher than last year’s average of 54 cases per week, the agency said.
“The trading performance of new properties has been brilliant and the trading volume of second-hand ones has further improved,” a Midland spokesman said last Monday.
The number of transactions at South Horizons in Ap Lei Chau and Tai Po Centre in the New Territories both increased by 400 per cent, respectively, securing 10 and five deals between March 4 and 10, up from just two and one the previous week, Midland said.
Uptown East in Kowloon Bay, a new project, sold its first round of 336 flats on Sunday after it received 6,899 registrations, an oversubscription of more than 19.5 times.
James Cheung King-tat, the executive director of Centaline Surveyors, a subsidiary of another estate agency giant Centaline Property Agency, said home prices did not record a surge in line with the transaction volume because home sellers had taken a conservative view of the city’s economic prospects.
HKMA asks banks to exercise caution when lending for ‘confirmor sales’
HKMA asks banks to exercise caution when lending for ‘confirmor sales’
“Even the price increase for first-hand properties has remained small as developers scramble to sell off their unsold units,” he added.
But Cheung said he expected the property market to warm up further with other “feelgood factors” predicted for later in the year giving a boost to the market.
“We expect the interest rates to decrease in the second half of this year, lessening the mortgage holders’ burden,” he said.
The Real Estate Developers Association of Hong Kong earlier estimated home prices to rebound by 5 to 7 per cent this year.
“Although the world’s economy isn’t doing great, it’s begun to gain the momentum to recover slowly,” association chairman Stewart Leung Chi-kin said last week.
Siu also warned the average number of complaints might increase with the surge in deals and advised prospective homebuyers to consult banks before they made any decisions.
Buyers should pay attention to potentially illegal advertisements that provided misleading information by methods such as mixing up the saleable area – the actual size of a home – and the gross area, which includes common areas such as lobbies, partitions, mechanical shafts and ducts.
“[Property agents] should never tell buyers how much the lenders can offer for the mortgage,” Siu said. “Some banks don’t provide mortgages for properties such as village houses.”
He also told homebuyers to find out whether a house might not be eligible for a mortgage because of a past death at the property.
“There is no complete definition of a haunted house,” Siu said. “The most proper way is to ask a bank first about whether someone died there or jumped to their deaths there.”
Hong Kong to take more cautious approach to land sales, development chief says
Hong Kong to take more cautious approach to land sales, development chief says
The authority issued a circular last December on the sale of incomplete properties in mainland China and overseas, requiring real property agents to engage a lawyer based in those jurisdictions to provide legal advice covering due diligence and key information on the seller and the property project.
The new measure will take effect on July 1 and agents who violate the rule may be subject to disciplinary action, with penalties ranging from a reprimand and fine to having their licence revoked.
As the mainland’s property market has lurched from crisis to crisis, with some major developers mired in debt, it has become increasingly common for construction projects to be left unfinished.
Advertisements for properties in places such as Britain, Australia and Japan are also often found in the city.
Siu said that the new arrangement ensured buyers could seek legal recourse through a local lawyer if they encountered misleading information from a seller.
He also reminded homebuyers that some places might not protect buyers of yet-to-be completed property as well as Hong Kong did. He suggested they contact a licensed agent in the city to help handle the purchase.
Authorities implemented a tenancy control mechanism dedicated to subdivided flats in 2022 to offer four-year security of tenure for the tenants and restrict the rate of rent increase on tenancy renewal to no more than 10 per cent.
Siu said the authority had fielded 13 complaints about real property agents’ breach of the control regulations, of which four were under investigation, by the end of 2023.
The remaining nine cases could not be continued because of insufficient information, he added.
Sui also warned real property agents to ensure they complied with the control mechanism as infractions could attract punishments ranging from a fine to licence revocation.
Hong Kong’s development minister has said the government will take a more cautious approach to selling land this year although she believes the scrapping of property cooling measures will “uplift” the market.
Secretary for Development Bernadette Linn Hon-ho on Thursday rolled out the land sale programme for the 2024-25 financial year, with eight residential sites, including six unsold ones from the previous list, estimated to offer about 5,690 flats.
Linn also hinted at a further delay to the sale of a prime commercial site, the Queensway Plaza shopping centre in Admiralty, which was on last year’s list, saying market sentiment was not appropriate.
Of the eight residential sites, six were rolled over from the current financial year. They are located in Stanley, Kai Tak, Sai Kung, Cheung Sha on Lantau Island, Tung Chung and Tuen Mun. The two new sites are in Siu Lek Yuen in Sha Tin.
Together with other sources, such as urban redevelopment, private development and rail property projects, the potential supply of flats is estimated to reach 15,150 in 2024-25, higher than the government’s annual private housing land supply target of about 13,000 homes.
Also listed in the 2024-25 programme are two commercial sites in Kai Tak and Shek Mun, providing respectively floor areas of about 80,000 square metres and 40,000 square metres.
Although Queensway Plaza – first proposed for redevelopment in 2016 – was included in last year’s programme, Linn said it was dropped this time because of the market situation.
“I think people can appreciate that under the prevailing market sentiment … It is a treasure site. We are not prepared to include it in the coming year’s land sale programme,” she said.
She disclosed that discussions were under way with tenants there to renew their leases. “In the case of renewal of tenancy, there is a need to allow a reasonable period [for the tenants to operate],” Linn said.
Financial Secretary Paul Chan Mo-po on Wednesday surprised the market in his budget speech by removing decade-long property curbs with immediate effect.
Linn remained cautious about how well the government’s move to scrap the measures could shore up the market or interest in land sales.
“The removal of the various special stamp duties should have an enlivening effect on the market. But as to the extent that it will affect the interest in the land sale, I think a basket of factors will be in force,” she said.
“It also depends on the developers’ strategy and their interest in the individual sites … and their own financial position and their own financing status and capability.
“We do not have a crystal ball and we are not able to assess to what extent the removal of the stamp duties will affect the land sale programme. It should help uplift the market a bit.”
An industrial site in Hung Shui Kui in the western New Territories will also be on offer in 2024-25.
The administration estimated the programme this year would realise HK$33 billion in land premium.
The government planned to sell off 12 residential sites, three commercial plots and three areas designated for industrial use in the 2023-24 financial year.
But only five residential plots were put out to tender by February and two were later withdrawn after they failed to reach their reserve price.
The administration passed a site in Tsuen Wan, designated for a starter home project, to the Hong Kong Housing Society, the city’s second-largest provider of public housing, despite the tender process cancellation.
Hong Kong delays Lantau reclamation project, orders departments to cut costs
Hong Kong delays Lantau reclamation project, orders departments to cut costs
The government also announced earlier that it would sell an industrial site in the final quarter of the financial year, which ends on March 31.
The administration expected to raise HK$65.6 billion in land premium fees in the 2023-24 financial year, but the budget statement revealed it only took in HK$19.4 billion – HK$46.2 billion below the target.
Additional reporting by Edith Lin
Knight Frank blamed the winter season, traditionally a quiet period, for most of the recent decline, but cited poor market performance for the anaemic annual growth.
“Securing tenants for high-end properties presents a challenge amid the scaling back of MNCs [multinational corporations] and weak IPO [initial public offering] activities,” said Lucia Leung, director of research and consultancy in Greater China at Knight Frank. “Although rental prices of the luxury segment have recovered from their pandemic-induced lows, they still fall short of the levels observed five years ago.”
The consultancy expects the overall residential leasing market to be “robust” in 2024, thanks to new measures to attract overseas talent.
“We expect the luxury residential market will go up by 3 per cent to 5 per cent,” Leung said.
Demand for Hong Kong flats with rents above HK$350,000 (US$44,757) seems strong, with tenants predominantly from mainland China, said Victoria Allan, founder and managing director of luxury real estate agency Habitat Property.
Although the market is not as busy as it was before the Covid-19 pandemic, luxury properties – those with rents above HK$100,000 – on the south side of Hong Kong Island are going “very quickly”, she said, adding that the trend will continue for the rest of the year.
Hong Kong mansion at The Peak sells for US$107 million at 35% discount
Hong Kong mansion at The Peak sells for US$107 million at 35% discount
Across the 10 cities covered in the index, luxury rents rose by an average of 5.2 per cent in 2023, down from 8.1 per cent in the second quarter and the lowest level observed since the third quarter of 2021. However, rents are still rising above their long-term pre-pandemic trend rate, the report said.
“While demand remains strong, the ability of tenants to continue bidding rents higher is being limited by affordability constraints,” the report said. “This, together with a slight improvement in rental supply, is limiting the pace of rental growth.”
Sydney tops the index with 18.1 per cent annual growth due to an ongoing housing shortage and a surge in demand driven by “a significant increase in inward migration following a three-year lull”, the report said.
Singapore sits in fourth place with a 5 per cent annual gain in rents, but the city also saw a decline in the fourth quarter, of 1.6 per cent. Auckland is in second position with an 8 per cent annual gain, and Tokyo in eighth with a 1.5 per cent increase.
New York comes in last, as the city registered the only annual decline in prime rents among the 10 cities, at 0.3 per cent. Rents in the city dropped 2.5 per cent in the fourth quarter.
Returning foreign workers boosted Macau residential rents last year: JLL
Returning foreign workers boosted Macau residential rents last year: JLL
“Over the past three years, prime global rental markets have experienced one of their strongest booms on record, with a perfect storm of low existing supply reinforced by low new-build completions meeting strong renewed demand supported by healthy labour markets,” Liam Bailey, Knight Frank’s global head of research, said in the report.
“Rents, which were running at four times their long-term rate a year ago, are now running at ‘only’ double that rate. However, the direction of travel is clear: expect rental markets to normalise over the rest of 2024.”