Land and home shortages are battleground issues for Hong Kong. Financial Secretary Paul Chan said recently that Hong Kong has enough land for development but planning processes need to be simplified to speed up the release of supply to tackle the housing crisis.
In the latest Weekly Snippet, Stella Ho of Valuation & Advisory Services shares her thoughts on the government’s plan to carry out a land use review study of the Ngau Tam Mei Area. In addition, Matthew Cheng of Capital Markets & Investment Services gives his on-the-ground observations of the property investment market.
Government’s feasibility study on Ngau Tam Mei Area to combat land supply
With the shortage of land supply, the government is working towards different ways it can release its land supply. A major part of that comes from the resumption of land in the New Territories. It was recently announced the government’s plan to conduct a feasibility study on the Ngau Tam Mei Area, in a situation that may release 6,000 public or private flats to the market. The feasibility study will go in parallel with MTRC’s study on the extension of the Northern Link.
The area will be one of the latest additions to the few new development areas, such as San Tin / Lok Ma Chau Development Node, that were already in place to combat land supply. If the study goes according to plan, it could further enhance the comprehensiveness along the Northern Link and release the development potential of the neighbouring land. It is hopeful that the plan will have positive impact on the property prices in the vicinity.
Investors stay cautious by seeking stable rental assets
Despite the improved market sentiment, investors are still cautious about the market, particularly on leasing risk, and they would be more interested in properties generating stable rental income. Recently, Dairy Farm put a portfolio of shops on the market with lease-back arrangement by Wellcome for a period of nine years. Although the yield is relatively low based on its indicative price, these shops have received very good responses and several offers have been made.
Apart from this retail portfolio, most of the recent transactions have been concluded with a stable or long-term tenancy, and the yield requirement of investors are now generally higher than what was experienced a few years ago.
In addition to retail shops and industrial assets like cold storage or data centres, schools have become an alternative asset sought after by investors. The tender of Stamford International School in Ho Man Tin has recently been closed, and despite the relatively big investment lump sum, several bids from institutional investors were received.