Hong Kong real estate regains appeal with international investors as they target hotels, industrial assets in 2022, CBRE survey shows

Hong Kong is back in favour among property investors, as it rejoins a list of the 10 most attractive investment destinations in Asia-Pacific in 2022 after failing to make the cut last year, according to a report by CBRE.

The city placed sixth in a poll of about 30 cities in the region, a marked improvement after dropping out of the list last year. In 2020, Hong Kong came eighth after investor confidence was affected by social unrest the previous year.

“Interest in Sydney and Hong Kong SAR was stronger compared to last year’s survey,” according to the report. “Hong Kong SAR has seen the return of international capital, particularly to the industrial and hotel sector for repositioning plays, as investors look to capitalise on price discounts in these sectors.”

This year there will be “growing interest from investors looking to purchase hotels for conversion into multifamily rental assets, serviced apartments or co-living space in urban areas, driven by strong end-user demand from young professionals wanting to move out from the family home to their own private spaces closer to work”, according to Reeves Yan, executive director and head of capital markets at CBRE Hong Kong.

However, with Hong Kong clinging to its zero Covid-19 policy amid the more transmissible Omicron variant, the hotel segment’s prospects are likely to be adversely affected this year, according to Marcos Chan, executive director and head of research at CBRE Hong Kong.

Hong Kong’s property sector has been regained some stability after being battered by the twin woes of social unrest and the Covid-19 pandemic. In 2021, local and cross-border investors acquired US$11.3 billion worth of property in the city, an increase of about a third from US$8.6 billion in 2020, according to Real Capital Analytics, which tracks deals worth at least US$10 million.

“Industrial was the star property segment in Hong Kong in 2021, [accounting for] 40 per cent of the total investment volume,” said Chan. “Hotels weren’t the most popular [investment] but property funds were quite active buying these assets. Five hotel transactions were recorded in 2021, accounting for just 4 per cent of the year’s total.”

For the third consecutive year, Tokyo was the most favoured investment destination, followed by Shanghai and then Singapore. Sydney came in fourth place.

The study, conducted in November and December last year, polled the appetite for acquisition, preferred real estate strategies, sectors and markets this year of 535 investors mainly based in Asia-Pacific. The survey covered all property segments.

The survey also found that some two-thirds of investors intend to make more acquisitions this year, with the appetite for acquisitions strongest among Singaporean, Korean, Japanese and Australian investors.

“With overall investor appetite expected to remain strong, we are predicting 2022 to be a banner year for real estate investment across the region,” said Greg Hyland, head of capital markets for Asia-Pacific at CBRE.

Tokyo’s appeal remains strong for international investors because of the availability of low-cost financing, high liquidity and large volume of mature multifamily assets, he added.

Given the overall upbeat mood, CBRE predicts total investment turnover to increase by 5 per cent to 10 per cent this year to a historic high of around US$150 billion.