New and unique advantages for sponsors in Hong Kong’s REITs sector offer significant long-term investment opportunity
9 Sep 2021
Substantial opportunities in Hong Kong’s Real Estate Investment Trust (H-REITs) market are quickly becoming the talk of regional financial services town as the city’s ambitious growth plans for the sector are laid bare. Indeed, for sponsors looking to list their REITs now, and for those seeking more detailed information (FSDC’s REITs paper), the offering is both timely and attractive.
Sponsors should look at REITs as an effective way to generate income from assets while retaining substantive control over portfolio and property management. Not only can sponsors reinvest funds through REITs listings into other pipeline projects, but also expedite the project cycle and put more focus toward their core competencies with the purpose of driving long-term growth in their businesses.
As an international financial centre, the city is best placed to keep up with an evolving global landscape as it re-affirms the attractiveness of its own REITs market. With the lingering presence of COVID-19, investment environment and investor appetites are looking for the steady urbanisation and corresponding infrastructure needs of emerging economies.
With the city’s simple and low tax system, REITs are exempted from profits tax and value-added tax. For investors, either local and foreign, individual and institutional, no tax is imposed on capital gains or dividend income, keeping in line with the city’s position as a wealth-generating hub.
A wider benefit is Hong Kong’s ever-closer connectivity with the Mainland. An attractive aspect of H-REITs is the strength of its deep RMB liquidity pool that sits at around RMB 750 billion, encouraging lucrative Mainland investment. Whilst the greater role of REITs in the internationalisation of RMB can expand the range of currency products available, thus improving the attractiveness of H-REITs.
Sponsors should also look toward the regional growth opportunities. Hong Kong has long played the role as super-connector offering great potential as a regional REITs hub if cross-boundary opportunities can be secured. Indeed, outside of the conventional asset types, REITs in the context of infrastructure integration can bring new opportunities for the financial market while supporting Government’s efforts to enhance the flow of goods, capital, information – and people – from across the Greater Bay Area.
Unquestionably, the REITs market across the Asia-Pacific region is competitive, but Hong Kong - as the region’s financial hub - is well placed to be the new go-to investment destination to list for ambitious sponsors.
With these factors combined, coupled with the benefits of domestic technological, economic and policy advancements, interested parties should consider the city’s growth momentum and the hefty prospect of winning steady and sustainable returns as potentially a big, long-term win.
For more details on the development of Hong Kong's REITs market, click here to download the report: Revitalisation of Hong Kong's Real Estate Investment Trusts Market - Promoting Liquidity.