Article
Unlocking Future Growth through Reform
A Vision for Hong Kong REIT Market
Published: 12 December 2024
An early adopter of REITs in Asia, Hong Kong was the fourth economy in the region to establish a REIT regime (2003) and the third to list a REIT on its stock exchange (2005). During its nascent stage, the Hong Kong REIT (H-REIT) market demonstrated impressive growth, catalysed by expanding property markets in both Hong Kong and mainland China, alongside first-mover listings by major institutions. Link REIT's debut as the city's first listed REIT set a global benchmark as the world's largest REIT IPO at the time.i Similarly, Yuexiu REIT, another early entrant, maintains an active presence in the market today.
This initial surge of growth was short-lived. Two decades after the listing of its first REIT, Hong Kong's market has plateaued at 11 listed REITs – a figure that falls short of the numbers seen in other major economies. Beyond cyclical market factors, industry leaders we interviewed highlighted regulatory requirements and tax considerations as ongoing factors impacting governance flexibility and sector development. They believe that enhancing the current H-REIT framework could create a more dynamic market environment, attracting both sponsors and global investors seeking portfolio diversification and stable returns.
Looking ahead, the outlook for the H-REIT market remains promising. The city is implementing measures to revitalise its REIT market, including the expansion of the Stock Connect scheme to encompass H-REITs – a move that will boost scale, liquidity and investment options while attracting fresh capital. The Government's extension of subsidies to REIT issuers until 2027, covering up to 70% of eligible listing expenses, further demonstrates its commitment. Strategically, Hong Kong's unparalleled position as China's capital and investment gateway presents a wealth of opportunities. These efforts and structural advantages, combined with shifting interest rate trends, signal a potential leap forward for H-REIT prospects.
To further strengthen the sector, this report recommends key reforms across regulatory and tax dimensions. Priority areas include introducing corporate REIT structures, providing greater flexibility in property holding and development rules, and implementing tax transparency to match international practices. These calibrated measures would complement Hong Kong's existing strengths and recent policy initiatives to boost Hong Kong's appeal as a premier REIT destination.