bodyType

customContents

entityId

entityUuid

articlePageQuery

filter

article

articleBaseAdvertisingInfoArticle

articleListArticle

articleSeoArticle

helpersCheckIsPostiesArticle

hooksArticleAcknowledgementGateOverlayArticle

hooksTrackPageViewArticle

hooksContentInterestArticle

articleLinkingDataContent

articleSchemaContent

liveArticle

advertZone

sentiment

contentLock

topics

types

sections

moreOnThisArticles

urlAlias

commentCount

sponsorType

authorLocations

authors

paywallTypes

corrections

displaySlideShow

multimediaEmbed

printHeadline

seriesContainer

socialHeadline

headline

flag

firstTopic

glossary

flattenTypeIds

publishedDate

additionalInfoBoxes

images

image

relatedLinks

relatedNewsletters

__typename

createdDate

sponsor

factSheets

series

disableOffPlatformContent

published

updatedDate

summary

subHeadline

body

keywords

copyrighted

customTimezone

liveContents

Peter Young

Property will always be a sensible investment asset. However, the choices available are changing as the ebb and flow of appetite, risk and reward in this “alternative” asset class opens up new opportunities and closes others.
Real estate is the third largest asset class in the average family office portfolio and 14 per cent of Hongkongers are planning to invest their disposable income into property in 2018, according to Schroders.
However, many may not recognise how the class is evolving and what that means for their property investment strategy.
Residential property has long been the stalwart of reliable overseas investments and in markets such as London, Hongkongers have led the way. In the first quarter of 2017, they became the biggest investors in the UK property market.
However, the benefits of residential property investments can soon disappear with regulatory and legal changes.
Children’s education drives Chinese demand for UK property
This year, many overseas investors with UK property will feel the impact of the Bank of England’s decision to raise the base rate, cutting into yields. Mortgage interest will only be tax deductible to the basic rate of tax (20 per cent) and additional buyers’ stamp duty will apply to new investment property purchases (3 per cent). All individual overseas investors will be subject to 40 per cent inheritance tax on their property beyond the applicable nil rate band of £325,000 (US$438,700).

Rents are not expected to climb more than 2 per cent, according to JLL. On top of that, the usual burdens of residential real estate still exist, regardless of how good your letting agent is.
When you want to exit residential real estate, you require market conditions to continue to be positive to realise a capital gain. And the new buyer will need to believe that the asset holds prospects for further growth.
Hong Kong’s investment interests in the UK undaunted by Brexit, says official
Property Reits (real estate investment trusts) have long been popular in Hong Kong. It is a highly liquid, easy to exit method of gaining income and capital exposure in the real estate market.
However, its liquid and tradeable price reflects investment sentiment not necessarily the underlying real estate value. Unexpected events can trigger downward shifts in net asset values and illiquidity in the market. These are equity market risks, not those that typically face a real estate investor, particularly one who wants the lower volatility and underlying asset value inherent in property.
There is a gap in the market to access institutional grade assets that are typically liquid and can be transparently valued
A growing trend is higher “institutional grade” real estate investments that are attracting the interest of non-institutional investors such as high net worth individuals (HNWIs) and family offices.
There is a gap in the market to access institutional grade assets that are typically liquid and can be transparently valued.
Co-investing with like-minded investors through specialist asset management firms, the capital pool – typically between US$5 million and US$50 million – allows them to target property opportunities that have historically been accessible to institutional investors only and yet are below the target value that institutional investors require to make a difference to their investment mandate.
On a project by project basis, HNWIs and family offices can repeatedly invest into the same subclass of real estate before they are packaged up to sell into a highly competitive institutional investor market.
This is a promising niche area in property investment and one that allows professional investors with about US$500,000 to invest to be part of a property development from the ground up.
The best sectors of real estate to consider are health care, purpose built student accommodation (PBSA), retirement housing and the emerging co-living rental accommodation sector.
Student housing looks like a good bet while the undervalued pound recovers
For example, take PBSA in the UK as compared to Reits and residential property. There has been consistent growth in the student accommodation market in the UK whilst Brexit has shown how major events can impact the net asset value of Reits and the broader residential property market. 
PBSA rental income grew about 3 per cent per year and the demand in this asset class resulted in healthy capital appreciation as institutional investors were prepared to pay higher net income multiples through capital value compression. 
As such, investors reaped the rewards of a superior return but of equal importance, they truly invested in the underlying asset and in a sector not correlated to the market.
Make 2018 the year you consider how best to structure your real estate investment portfolio in light of constantly evolving markets and new opportunities.
Peter Young is chief executive of Q Investment Partners



Is Trump election good or bad for Chinese property investors in the US? It’s a mixed bag

How man caves are becoming personal members’ clubs where you always get in – remember Cribs, with its opulent homes of actors, sportsmen and musicians like 50 Cent and Snoop Dogg?

Meet Anita Verma-Lallian, who moved into Matthew Perry’s house after his death: the real estate consultant and film producer had the Friends’ star’s home blessed in a traditional Hindu ceremony

As Hong Kong and Singapore age, health businesses become bigger property players

International Property

Why 2018 is the year you should diversify your real estate portfolio

The Collective Old Oak co-living space in West London that has 550 micro units. Co-living is emerging as a popular property investment choice in the UK. Photo: Nick Guttridge

A man wears a bowler hat outside the Bank of England in the City of London, Britain, November 2, 2017. REUTERS/Toby Melville

London cityscape during sunrise with its reflection from river Thames. Photo: Shutterstock 446287033

Brexit not seen affecting stability of UK property market

Long office leases seen protecting investors from short-term fluctuations. Photo: Reuters Apartment buildings are backdropped by skyscrapers of banks at Canary Wharf in London, Britain October 30, 2015. REUTERS/Reinhard Krause/File Photo

The development of One Hyde Park is seen London, May 2, 2014. London's red-hot property market has struck a new record with the sale of a 140 million pound ($237 million) unfurnished apartment, but even the developer of the opulent building warned that some asking prices in Britain were unsustainable. "We're in boom-time prices, more expensive than we've ever been in the history of mankind," said Nick Candy, one of the developers of London's One Hyde Park luxury apartments, at the pinnacle of the capital's super-prime residential sector. REUTERS/Paul Hackett (BRITAIN - Tags: BUSINESS REAL ESTATE)

Changes to UK property taxes to take effect in April

Follow pizza trail to spot hot UK property trends

Hong Kong investors face cloudy prospect in UK property sector

The HKMA will develop the Hanover Square Estate project.

More Hong Kong investors in UK property looking beyond London

The Cube in Birmingham has drawn HK buyers. Photo: SCMP

Property

International

Hong Kong & China

Business

The best sectors to consider are health care, purpose built student
accommodation, retirement housing and co-living rental sector


Property financing

Property investment

Investing

Expresses the views, ideas and conclusions of the author. (Eg. Enough of Crazy Rich Asians, think of crazy poor Hongkongers.)


Column

Concrete Analysis

Concrete Analysis | Why 2018 is the year you should diversify your real estate portfolio

The best sectors to consider are health care, purpose built studentaccommodation, retirement housing and co-living rental sector

The best sectors to consider are health care, purpose built student
accommodation, retirement housing and co-living rental sector