The residential market in Hong Kong has seen more investors, both local and Peoples Republic of China (PRC) developers, showing interest in acquiring brand-new en-bloc properties.Investment in turn-key residential buildings so far this year totalled at least HKD 4 billion, according to the latest Hong Kong residential market research, released today by JLL the real estate service provider. 

Developers turning to an en-bloc exit strategy

Against an expanding supply pipeline and an increasingly competitive environment, JLL expects that more developers of residential developments to consider an en-bloc exit strategy, instead of strata-titled sale, in order to realise gains more swiftly.  A total of four en-bloc residential buildings changed hands so far this year. Investment in turn veteran investor Tang Shing-bor reportedly purchased a turn-key en-bloc residential project “T Plus” in Tuen Mun comprising a total of 356 units for HKD1.2 billion.According to market sources, “T Plus” will likely be leased out as student dormitories – with unit size ranging from 128 to 250 square feet. 

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With a handful of large-scale residential projects being launched and approximately 10,000 primary units absorbed in the first half of the year, the market has seen a slowdown in the sales velocity of new projects in recent months.Given increased interest in en-bloc projects, some developers resorted to selling their developments in bulk to realise gains for other investments in future.

Mainland developers looking to diversify investments

Henry Mok, regional director of Capital Markets at JLL, said, “En bloc residential developments could be one of the acquisition targets for Mainland developers, given their desire to diversify their investments and increase their market share in Hong Kong.“While it saves them time and resources from having to build ground-up developments, it is unlikely they would pay a premium purchase price for these en-bloc properties, in order to still be able to capitalise on their future exit plans.”Ingrid Cheh, associate director of research department at JLL, said, “Aside from the interest from Mainland developers, the demand from both local investors as well as investment funds for en-bloc residential properties could also grow for developing some niche housing products, such as elderly homes, student or co-living accommodation.“In view of the changing demographics of Hong Kong’s population and prices now at record-high levels, the market should see more opportunities arising from developing rental housing options that can cater for a cohort’s specific needs.”For related news and features, visit our Commercial Property section.

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