Hong Kong real estate investment prospects improved as the city jumped into third place among 20 Asian Pacific cities, according to a survey by Urban Land Institute (ULI) and PricewaterhouseCoopers.

After Tokyo and Singapore, Hong Kong ranked third in terms of investment prospects. The territory also ranked sixth in development prospects, the survey said.

Hong Kong real estate market has been on a rally for the past five years, but the demand is projected to slow, according to the report by Washington-based research firm ULI and New York-based accounting firm PricewaterhouseCoopers.

Although the rising costs of living, a decline in export services and a drop in private consumption are taking a toll on Hong Kong's property market, some survey respondents seized investment opportunities in the city.

"Many of the Hong Kong developers are cash-rich, so they are well positioned," one interviewee stated.

The office sector in Hong Kong has earned the strongest "buy" and "hold" recommendations, with 57 percent of respondents for "hold" and 21 percent "buy". Fifty-five percent recommended "hold" for the industrial or distribution sector and 28 percent for "buy". Forty-nine percent advised "hold" and 27 percent recommended "buy" for the residential rental sector.

Talking about the impact of global credit crisis in the Asian Pacific market, ULI Senior Resident Fellow for Finance Stephen Blank said Asia faces the same liquidity crises like the rest of the world.

"Financing will be the single biggest issue facing the industry in 2009," Blank added.

CY Leung, Asia chairman of ULI, expects the rent of Grade-A office in Hong Kong to fall in the short term. "Rents of Grade-A offices in Central has advanced quickly, it is time for a decline," Leung said.

Asia Pacific Real Estate Tax Leader KK So said Asia will recover from the global financial crisis faster than Europe and the US, as markets in the region are less exposed to structural investment products.

"As long as Asian property developers are financially strong and internal consumption in the region remains high, the real estate market will not be impacted heavily by the financial turmoil," So said.

(HK Edition 12/09/2008 page2)