Mainland Chinese firms to invest more in Hong Kong property

January 31, 2017

Mainland Chinese investors expanding territory into Hong Kong properties

Mainland Chinese investors choose Hong Kong property for expansion | Hong Kong Property | Yazhou PropertyHong Kong commercial and residential properties in the heart of the city

From 2015 to 2016, Mainland Chinese investors overbid some of Hong Kong’s most powerful developers by purchasing 29% of Hong Kong properties for development. This percentage of overseas property purchased is a big increase from the 5% of Hong Kong land they obtained from 2013 to 2014.

The buying frenzy came at a time when prices of Hong Kong properties have skyrocketed, opposing the government’s efforts to cool off the Hong Kong property market.

Due to increasing property prices in Hong Kong, about 200,000 residents, who are below 35 years old, have resorted to staying at partitioned apartments, wire cages and spaces smaller than car parks.

Land grabbing of Hong Kong properties

According to DTZ/Cushman & Wakefield, the purchases of HNA Group and China Overseas Land & Investment have accumulated up to $6.6 billion of mainland institutional investment in real estate last year. The figures are greater compared to the $1.46 billion of 2015. This land grabbing is said to further increase property prices in Hong Kong.

JLL Hong Kong’s head of research said that the luxury Hong Kong properties to be built on HNA Group’s latest land purchase which amounted to $713 million can go for up to HK$25,000 or $3,200 per square foot. These values are about 40% higher compared to the property prices in the area.

The average price per square foot of a Hong Kong luxury apartment is $3,000. It’s ranked second among the most expensive in the world, trailing behind Monaco. London is at third with $1,390.

A $2.2 billion Hong Kong site is set to be auctioned in the first quarter of the year. This is the first commercial land to be sold in the CBD in the last 20 years and is expected to be bought by Mainland Chinese investors.

Some property developers in Hong Kong such as Hang Lung Properties and Hopewell Holdings share the same views, and are not competing with the spiralling prices of properties now.

The big demand for overseas property investment has alarmed Chinese authorities. They are already preparing capital outflows despite the weakening currency. And although Beijing is facing a crackdown, investors are favouring Hong Kong as their second best destination for outbound deals after the US.

Senior director of property consultancy Knight Frank Thomas Lam said that the new investors from China will continue to weaken mid- and small-sized local developers to buy land in Hong Kong.

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