(19 January 2023, Hong Kong) Hong Kong ranks fifth in the top target cities for cross-border investment, returning to the top five after a four-year absence., according to CBRE’s 2023 Asia Pacific Investor Intentions Survey.
Hong Kong has returned to the top five Asia-Pacific investment destinations with Tokyo being the top preferred target market, followed by Singapore(#2), Ho Chi Minh City (#3) and Sydney (#4).
As many economies continue to raise interest rates to tackle inflation, and with growing concerns of a recession in other parts of the world, Asia Pacific investors have become more cautious, with net buying intention softening in 2023. According to the survey, although fundraising activity remains healthy, most investors intend to adopt a wait-and-see stance in anticipation of slower yield expansion and milder rate hikes.
“With the reopening of border with mainland China and more reasonable valuations, investors once again find Hong Kong SAR attractive, making the city to the top five for the first time since 2020,” said Marcos Chan, Executive Director, Head of Research, CBRE Hong Kong. “Hong Kong is on the road to recovery, and this is likely to be faster and stronger than we expect.”
Amid the rising interest rates and recessionary fears, Asia Pacific investors displayed the weakest net buying intentions since 2019. While the pace of local policy rates has been rapid, Hong Kong investors have exhibited the weakest buying intentions among the investors in the region. However, the recent price correction and upturn in transactions is expected to encourage more investment in this market.
“Investors are taking a cautious approach due to continuous interest rate hikes, falling equity prices and potential economic recession. The overall investment activity is forecasted to accelerate in the second half of the year as the city shows more signs of a solid recovery,” said Reeves Yan, Executive Director, Head of Capital Markets, CBRE Hong Kong. “We are seeing industrial and logistics, and retail properties are becoming the preferred assets for investors.”
More than 60% of investors expect to find discounts in retail and Grade A offices in 2023. Despite logistics being the most preferred asset class, only 11% of the investors are willing to bid above the asking price this year, compared to 35% in 2022.
Other key highlights from the survey include (conducted in November and December 2022):
- The majority (93%) of institutional investors expect allocations to real estate to increase or remain stable in 2023.
- Investors cite the fear of a recession, interest rate hikes and a mismatch in buyer and seller expectations as their greatest challenges this year.
- Investors prefer high quality assets in prime locations across all sectors, as these assets have strong tenant demand drivers and resilient cash flow.
- Only 5% of investors say they will invest in alternative sectors, with healthcare-related properties, including life sciences and medical offices, the most preferred, overtaking data centres for the first time.
- Around 60% of investors intend to use ESG criteria in making investment decisions. On the other hand, 40% plan to delay their ESG adoption due to increased costs and current economic conditions.
CBRE’s 2023 Asia Pacific Investor Intentions Survey was polled during November to December 2022 with over 500 respondents in the region on their buying intentions, perceived challenges and preferred strategies, sectors and markets for the coming year.