CFA Society Singapore
(Sept 14): A correction in Hong Kong property prices of as much as 15% in the first half of 2019 is possible as interest rates rise and the tide of money flowing in from mainland China recedes, according to Kenneth Gaw, president of Gaw Capital Partners.
That could present a buying opportunity for the Hong Kong-based private-equity firm, which recently purchased a portfolio of shopping malls in the city and which is in the process of raising its sixth Asian fund, Gaw said on the sidelines of the Milken Institute Asia Summit in Singapore on Thursday.
“The Hong Kong market has been going up for the last 10, 15 years,” Gaw said. “With interest rates going up, less money coming in from China, I think, very possible, there is a correction.”
Signs that one of the world’s hottest property markets may finally be cooling are emerging almost daily, with developers offering free perks to shift apartments ahead of an impending vacancy tax and other real estate firms offering buyers discount rates. Gaw isn’t alone in sounding the alarm bell; earlier this month Nomura International (HK) said residential prices will fall 13% next year, wiping out all of 2018’s gain.
Gaw Capital last year led a consortium that bought a portfolio of shopping malls in Hong Kong for HK$23 billion ($2.9 billion) from Link Real Estate Investment Trust. “We will wait a see a little, but it is our home market, and we still like those kind of niche purchases where we can add value,” Gaw said Thursday.
In China’s residential market, Gaw sees mounting pressures, considering land auctions are failing in some cities. Longer term, growth drivers such as a rising middle class, urbanisation and domestic consumption will be a positive force, he said.
Gaw also said Vietnam is “probably the best opportunity as a country,” after a lot of manufacturing from China migrated to the Southeast Asian nation. Singapore, meanwhile, as one of the only major Asian property markets to decline in value, has plenty of buyers on the sidelines ready to jump back in. Local news reports in January said the private-equity firm was interested in buying Singapore office and residential property assets.
Since its inception in 2005, Gaw has raised five funds targeting Greater China and the Asia Pacific. It had assets under management of $17 billion as of the first quarter, according to its website.