Hong Kong, 27 November 2017 - Colliers International (NASDAQ and TSX: CIGI) today launches the results of its investor survey covering 35 investors and developers. The survey aims to understand investors’ views about Hong Kong and the overall APAC’s real estate markets in 2018. The results show that investors are optimistic about the APAC property markets since more than 50% of respondents would be net buyers in 2018. Investors are cautiously optimistic about Hong Kong due to the rising capital cost and record level property price while the economic fundamentals remained strong.
Economic outlook and interest rate are the two major factors which will affect investors’ investment decision in 2018. “Low investment yield will persist as we expect a loose monetary environment to continue. China’s economy has regained its momentum in 2017, and looking ahead PRC outbound investment will play an important role in the APAC market.” Antonio Wu, Deputy Managing Director of Capital Markets and Investment Services said. Around half of the investors surveyed believe that total investment volume for APAC market will continue to grow in 2018. Furthermore, Hong Kong, Shanghai, Singapore and Beijing are considered as the most active cities for property investment.
Colliers’ investor survey shows that the vast majority of investors expect the cost of debt will increase in Hong Kong while investment yield remains unchanged for the next 12 months. “Investors are getting more cautious about record high property prices, particularly with a rising capital cost. They would adopt a more defensive approach to hedge again downward price adjustment,” Antonio added. Office is still the most popular sector with more than 75% of respondents are interested in en-bloc or strata-title office investment. In addition, investors have started to look for opportunities in the industrial properties market with the upcoming announcement of a new industrial revitalisation scheme by the Government. With retail market on its way for a moderate recovery in 2018, it has led to an increased interest in retail properties. Developers and some investors have also expressed their interest in development site as residential prices continue to rise.
“With the current compressing investment yield, underwriting core or core-plus investment has been challenging. The survey shows that 75% of investors are hunting for good value-add opportunities,” Daniel Shih, Director of Research said. Many are betting on continuous value appreciation through repositioning and refurbishing Grade B office buildings in fringe CBD as well as revitalising industrial properties for office uses.”
Looking beyond 2018, economic fundamentals for the APAC region will still be on solid ground. However, the further normalisation of balance sheets by major central banks will increase the capital cost and put pressure on property prices. Regarding Hong Kong, the inflow of Chinese capital will push up both rent and price of commercial properties. With the new infrastructure connecting Hong Kong and the rest of the Greater Bay Area, property developments near the key infrastructure such as Kowloon West will benefit the most. We expect retail and hospitality sectors should gain the most from the retail and tourism recoveries.