HK must improve REIT regulations, says APREA

22 November 2013   Category: News, Asia, Hong Kong   By Asia Asset Management

It is imperative that Hong Kong enhances its real estate investment trusts (REIT) regulations to align itself with market changes and international norms, thereby securing its role as an international asset management centre and capital formation centre for REIT listings, according to the Asia Pacific Real Estate Association (APREA), which promotes and represents the real estate asset class in Asia Pacific.

The Financial Services Development Council (FSDC) recently released a research paper, entitled: “Developing Hong Kong as a Capital Formation Centre for REITs”. The paper details a number of proposals which, if adopted, would increase employment in Hong Kong and assist in growing Hong Kong's economy.

Proposals in the FSDC paper, which APREA supports, include:

  • Recategorisation of Hong Kong REITs under the Mandatory Provident Fund Schemes Regulations, to remove a significant constraint that currently applies to MPF scheme investment in REITs;
  • Giving Hong Kong REITs the same tax transparency treatment that applies in other jurisdictions;
  • Permitting REITs to undertake limited property development activities, in line with other REIT markets;
  • Improving the application of the Takeovers Code to Hong Kong REITs.

Peter Mitchell, CEO of APREA, commented: “APREA fully supports the proposals contained in the FSDC paper. A recent independent research paper APREA has commissioned on the impact that REITs have had on Asian economies clearly shows that the impact that REITs have had in Hong Kong has been muted relative to their impact in Australia and Singapore, because of the issues raised in the FSDC paper.”

Lim Swe Guan, chairman of APREA, added: "Back-testing of various REIT markets has shown that Asian REITs have generally outperformed bonds and general equities during the last five-to-ten years. We believe the sector will continue to grow as more investors embrace the benefits of investing in this low volatility, high yielding vehicle. Jurisdictions in the region are implementing proactive policies to capitalise on the demand and capture a larger share of the market and APREA encourages Hong Kong to do the same."