Big deals surge as sentiment returns

Property | Staff reporter 2 Sep 2021

Sentiment for big deals in the market has picked up this year, with both Chinese and foreign capital jumping in.

Data from Midland IC&I (0459) shows that by the middle of the past month more than HK$49.1 billion worth of transactions in industry and commerce businesses had been struck, more than the total for last year.

Of that figure, southbound net capital inflows contributed HK$8.53 billion this year, while foreign capital amounted to HK$8.79 billion, setting a new high since the social unrest of 2019.

Midland IC&I believes that with market liquidity still abundant, a stable economy and with a reopening of the border with the mainland just a matter of time, the market for industrial and commercial properties will remain stable as well.

This year's transaction volume is expected to hit 180 and involve about HK$90 billion, says the agency.

Tony Lo, chief executive at the property agency, said that the overall investment market has gradually warmed up, and the number of big transactions, those involving at least HK$100 million, has shown an upward trend as the in Hong Kong is under control.

Data from the agency shows that the total number of transactions in the whole investment market - including industrial buildings, businesses, spaces, hotels, service residences, parking spaces and old buildings - was 115 by August 15, about 30.7 percent more than the whole year of last year.

The HK$49.1 billion worth of deals is 1.2 percent higher than that for the whole last year.

With stability returning to the investment environment, the flow of mainland and foreign capital into the market has also increased, Lo said.

Since the start of the year, deals involving mainland capital have hit HK$10.1 billion while foreign capital transactions amounted to HK$10.3 billion, accounting for 20.6 percent and 21 percent of the big deals.

Both are higher than the same period last year.

Although the implementation of the anti-foreign sanctions act has been postponed in Hong Kong, it has still caused concern among foreign funds. Since the first half of the year has seen an uptick in foreign fund inflows, it is expected that the pace of foreign capital entering the market will slow down in the second half, Lo said.

Eric Ong, sales director of Midland IC&I, pointed out that the big transactions seen this year have mainly involved whole floors, with only two deals recorded for whole buildings, accounting for only 7 percent of total deals.

Ong believes that this low percentage was rare and occurred only because of worries about the economy, which brought weakness to the market for office buildings market and caution to investors.

Mainland buyers have been behind HK$15.67 billion worth of transactions this year, accounting for about 12.7 percent of the total, which is a low level in recent years.

This reflected a significant reduction in the proportion of mainland capital entering the market due to the ongoing prolonged border closure.

Since the beginning of this year, big deals involving office buildings have been dominated by real-estate enterprises who have spent HK$12.36 billion, accounting for two thirds of the total purchase amount, Ong said.

He believed that mainland and local buyers will continue to dominate the market and will mainly focus on the sale of whole office floors.

The investment value of core office buildings will be slightly better than that of non-core areas since the future supply of office buildings will mainly be concentrated in non-core areas, Ong said.

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