Hong Kong and Singapore are two of the most popular property markets in Asia Pacific. They are often compared with each other as London and Paris are within Europe. They have some similarities and some differences.
They are both islands that each were under UK colonial administration for more than 100 years and benefit from one of the great legacies left behind by the British: robust legal systems and transparent, well-functioning property markets. Both economies were built for and still thrive on trade and finance and both host local and international businesses that provide employment for locals and expats alike.
This in turn creates demand for offices, shopping, logistics, residential, leisure and all other types of real estate.
Both islands are dwarfed by their neighbours: Hong Kong by mainland China and Singapore by Indonesia and Malaysia. Both are populated mostly by ethnic Chinese; Singapore also has a large minority of Indians and Malaysians.
Both islands are a magnet for Asia’s shoppers but now retailers in both cities are struggling. In Hong Kong 20% fewer shoppers from China visited in 2015, which caused rents to fall by 22%; Singapore suffers from a subdued local economy.
Low interest rates, reliable currencies and the “safe haven” status of both islands created bubble conditions in residential markets during 2010. Both governments took swift action to cool the markets, which has shrunk volumes and moderated price increases.
These are just a few of the similarities. But perhaps less known are some of the differences.
Hong Kong has seasons; Singapore is on the equator so does not. Hong Kong is twice the land area of Singapore. Hong Kong is seen as the gateway to China. Singapore, the gateway to South East Asia. Singapore is independent; Hong Kong is part of China, co-existing with it under the “one country, two systems” mantra.
Hong Kong has an average prime office rent of £180 per sq ft a year, with steady demand from, among others, the growing Chinese financial services sector. There is virtually no vacancy in the central CBD – rents are rising. Singapore has an average prime office rent of £65 per sq ft a year. Demand for space is subdued because of its exposure to lacklustre sectors such as shipping, oil, commodity trading and big international banks and also because the government strictly controls immigration. Supply is plentiful – rents are falling.
Both are popular with investors and prime yields are sub-3% but the big, shiny buildings that grace the skyline of Hong Kong rarely become available as they are owned by the old trading families who seldom sell. Singapore’s market is more internationally owned and traded.
There is a strong rivalry between the two. Business people based in Hong Kong tend to look upon Singapore as Londoners look on Birmingham. Personally, I live in Singapore but spend a lot of time working in Hong Kong and I am often asked which is “better”?
This is a question best left unanswered. Both islands are superbly located and each offer a business environment and property market that their bigger neighbours cannot easily replicate. Hong Kong’s dim sum or Singapore’s chicken rice? Both are great.
Alastair Hughes is chief executive, Asia-Pacific, JLL