Hong Kong SAR’s real estate sectors to benefit from China’s economic recovery

-- Positive economic growth in China along with the strengthening of RMB creates rising demand in Hong Kong’s real estate sectors for leasing and investment --

Hong Kong, 10 December 2020 – Leading diversified professional services and investment management firm Colliers International (NASDAQ: CIGI; TSX: CIGI), today released China’s recovery and its implication to Hong Kong SAR’s real estate market. The report examines China’s economic recovery compared to other major global economies that are still struggling with COVID-19, and critically, the neighbouring ripple effect on Hong Kong’s economy and real estate market.

Rosanna Tang, Head of Research, Hong Kong and Southern China, explained: “Hong Kong’s economy is increasingly tied with China’s performance. To see signs of a Chinese economic recovery is a positive prospect for Hong Kong as a whole, and even more so for the real estate market across different sectors and assets.”

China’s GDP grew by 4.9% Year-on-Year (YoY) in Q3 2020, compared to 3.2% YOY in Q2 2020. This was largely propelled by stabilisation of COVID-19, but it occurred concurrently with a boost in Hong Kong’s economy with GDP returning to growth of 2.8% QOQ in Q3 2020 after it contracted for five consecutive quarters since Q2 2019.

“The uptick in economic performance was mainly driven by an improved external trading environment amid the accelerated growth of the Mainland’s economy. The recovery of trading volume is particularly noticeable in China, with Hong Kong’s total export to China seeing growth of 17.6% YOY during September,” added Rosanna.

Strong RMB to solidify Chinese interest in Hong Kong’s property market

RMB reached a 29-month high and is expected to remain strong against the Hong Kong dollar. The rise and upward pressure from RMB could make property pricing in Hong Kong more attractive to Chinese or RMB-dominated investors. This adds further leverage to the current flow of Mainland Chinese capital which accounts for 60% (RCA data; as of 19 Nov 2020) of the cross-border real estate transactions.

Antonio Wu, Deputy Managing Director of Capital Markets and Investment Services, said: “We previously stated Chinese capital has regained momentum which is supported by China’s economic growth and is anticipated to stimulate demand from Mainland Investors. However, Hong Kong’s low interest rate market, high market liquidity and recent removal of the Double Stamp Duty creates a strong platform for local real estate investors, hinting that the market is primed for recovery and will remain competitive in 2021.”

Hong Kong’s status as a financial gateway to boost Grade A office market

Hong Kong’s position as a global financial gateway will be critical in managing the flow of overseas capital, in and out of the Mainland China and the GBA. This creates an increased business opportunity, especially for the finance, wealth management and insurance sectors.

Fiona Ngan, Head of Office Services, stated: “Growth in China and Hong Kong’s GPD will create more stability for Hong Kong’s Grade A office rental market, which trends very closely with the city’s GDP performance. For landlords, we recommend reviewing their tenant mix to include a balanced approach to PRC clientele to help capture higher occupancy rates.”

Find out more about China’s recovery and its implication to Hong Kong SAR’s real estate market by clicking here.

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