Chinese Demand For Hong Kong Property Climbs Amid State Support

(Bloomberg) -- Mainland Chinese are returning to Hong Kong’s real estate market, snapping up millions of dollars in land and office blocks, bolstered by China’s support for Hong Kong’s status as a financial hub.

Chinese developers have won six of the 13 land sites in government tenders since July last year, accounting for about 60% of the total spent for the parcels, according to a report released Wednesday by Colliers International Inc. Chinese investors also made up almost all of the cross-border property deals in Hong Kong, the report shows.

The active investment in Hong Kong real estate from state-owned and private businesses is a vote of confidence in the city at a time of growing concerns for Hong Kong’s diminishing freedom and lackluster economy.

China will provide support for its financial institutions that are doing business in Hong Kong, the China Banking and Insurance Regulatory Commission said in a statement over the weekend. The regulator also stressed that the city’s status as a financial center wouldn’t be weakened by China-U.S. tensions.

“We believe mainland firms and capital will continue to seek opportunities, becoming the next wave of demand in the Hong Kong leasing and investment markets,” Colliers said in the report led by Rosanna Tang, head of research. The company cited China’s resilient economy, cross-border financial initiatives in stock and wealth management, Hong Kong’s capital pool for fundraising, and the Greater Bay Area plan as the drivers.

Knockout Bid

The most notable land purchase in the year was by state-owned China Mobile Ltd., which spent a record HK$5.6 billion ($723 million) for an industrial site in the Sha Tin area in July. The firm paid 55% more than the second-highest bidder, government data show.

Ping An Insurance Group Co. and China Cinda Asset Management Co. were the top two buyers by total acquisitions in Hong Kong’s commercial property market over the last 12 months, according to Colliers. Mainland Chinese capital has made up 98% of the inbound real estate investment in 2020, up from 61% for all of 2019.

Chinese firms represent 11% of the grade A office leasing deals signed in the first half of the year, with a majority of the companies coming from the banking and finance industries, said Colliers. CMB International Capital Corp., China Minsheng Banking Corp. and Orient Finance Holdings Ltd. expanded their office space in Central this year, while some foreign players surrendered space in the city.

However, active investment from Chinese companies hasn’t turned the market around. Office and shop transaction volume and value slumped 41% and 55% respectively in the first half of 2020 compared with the same period last year, data from Savills Plc show.

The Hong Kong government recently revised its 2020 forecast for the economy to contract a record 6% to 8% because of the pandemic and rising trade tensions. The city has been in recession since the second half of 2019 due to sustained protests before the coronavirus.

©2020 Bloomberg L.P.