Hong Kong investment transactions hit 10-year low in 2020

Transaction volume almost halved to USD 7.7b.

According to Colliers, Hong Kong’s investment momentum turned sluggish in 2020, with the total transaction volume dropping 47%YOY to HKD 60.1 billion (USD 7.7 billion), a record low over the last decade.

Most investors have been taking a wait-and-see approach throughout 2020, given the market was still shadowed by different layers of uncertainty. Meanwhile, the global outbreak of the COVID-19 pandemic and the subsequent travel restrictions also likely deterred some site visits and investment decisions, especially for those investors with decision makers abroad, making local and mainland capital the key buyers.

Whilst the property market in Hong Kong has been undergoing a correction across most commercial sectors, the gradual increase in yields in the last two years prompted investors to look for distressed assets or properties with bigger discounts, despite their limited availability. The bid-ask dislocation remained the key hurdle for investment transactions over the last 12 months.

Here’s more from Colliers:

We expect investment transactions to pick up in 2021 from 2020’s low base. Investors are seeing increasing clarity, including the results of the U.S. presidential election, as well as the COVID-19 vaccine rollout in Hong Kong.

Sentiment in the investment market has improved since H2 2020. Private equity funds have ample liquidity to deploy in 2021 as their transactions have been muted in 2020. Meanwhile, mainland capital will likely become more active in acquiring properties, backed by mainland’s early economic recovery and the stronger Chinese RMB, which makes properties priced in Hong Kong dollars more attractive.

We expect the investment market will continue to enjoy a low-interest-rate environment. The recent removal of the Double Stamp Duty1 (DSD) on commercial assets announced in the latest policy address should help provide some buffer to transaction volumes especially for smaller lump sum deals, as larger deals can bypass the DSD by employing a company share purchase structure.