Investment Opportunities in China’s 20-Year Plan for the Hong Kong–Greater Bay Area

A massive infrastructure program is interconnecting the cities of China’s Greater Bay Area and opening up a wealth of real estate opportunities. Attendees of the ULI Asia Pacific Leadership Convivium, held in Shenzhen in March, heard two presentations on the Greater Bay Area (GBA) and also got involved with discussion groups who reported back to the main conference.

The GBA consists of the Mainland China cities of Guangzhou, Shenzhen, Zhuhai, Foshan, Huizhou, Dongguan, Zhongshan, Jiangmen, and Zhaoqing as well as the special administrative regions of Hong Kong and Macau.

The event was well timed, coming less than two weeks after the announcement of the outline development plan for the GBA by the Chinese government. This 60-page document sets out China’s ambitions for the region and how it intends to achieve them.

Marcos Chan, head of Hong Kong and Southern China research at CBRE, said to delegates that the GBA already punches above its weight. “The GBA is actually a very small region in the context of China; it only represents 0.6 percent of the country’s total land resources and 5 percent of population. However, it generates 12 percent of GDP and has shown average growth of 7.7 percent in the past three or four years.”

China’s government hopes to cut travel times between the GBA cities by building road and rail links, including thousands of kilometers of high-speed rail and projects such as the 55-kilometer-long Hong Kong-Zhuhai-Macau Bridge. These projects are cutting journey times; for example, Hong Kong can be reached from Guangzhou in 45 minutes, compared with a journey time of two hours before the high-speed rail link opened. The new transport system is linked to China’s nationwide high-speed rail network, the largest in the world.

“What we can expect to see is a huge inflow of capital, financial capital, and human capital from the rest of China and from the rest of the world into the GBA,” said Chan.

There are obstacles to the integration of the region, Chan said. “The GBA is a very complicated region, with three very different legal systems [in Mainland China, Hong Kong, and Macau], three currencies, and three different resident identities.” For example, residents of Mainland China do not have the automatic right to live in Hong Kong.

The outline development plan shows the Chinese government is aware of the challenges involved in integrating the GBA, said Hei Ming Cheng, founder, director, and chief executive of Chinese investment manager KaiLong, speaking later in the day. He added that the plan has a keen focus on improving sustainability and livability in the region—it is not just about growing gross domestic product (GDP). “Education, wellness, and quality of life are equally important,” he said.

Both Chan and Hei agreed that the prime beneficiaries of integrating the GBA would be the larger cities of Hong Kong, Shenzhen, and Guangzhou. However, smaller cities will see spill-over benefits and will move up the value chain, said Chan, by growing the service sector of their economies.

The GBA is split by the Pearl River Delta, with the most developed cities of Hong Kong, Guangzhou, and Shenzhen being relatively close together on the eastern side. New infrastructure will bring cities such as Jiangmen and Foshan closer to the action and boost demand for real estate there, said Chan.

Growth of the GBA will provide a huge number of opportunities for real estate companies, both Chinese and overseas. Chinese companies will inevitably dominate the residential development market, said Hei, but the reduction in journey times threw up interesting possibilities—cheaper areas of the GBA could become commuter zones for Hong Kong and Shenzhen, while retirees from these cities could choose cheaper properties still close to their children. Residential prices in Guangzhou are less than a quarter of Hong Kong’s and Guangzhou is more expensive than smaller cities in the region.

Hong Kong developers, however, have the opportunity to work in a bigger market; today there is only one square kilometer of available development land in Hong Kong, compared with 700 square kilometers in the GBA. Some members of the audience questioned whether Hong Kong’s record office prices could be maintained with competition from cheaper GBA cities, but both Hei and Chan said they expect prices to be maintained, while the gap between Hong Kong and cities such as Shenzhen will close.

The development of the GBA will see huge quantities of high-quality real estate constructed, much of which is likely to end up owned by China’s growing insurance sector.

Delegate discussion of the real estate opportunities in the GBA focused on some of the obstacles to investors from outside China, including competition from local capital and the difficulty in persuading overseas investment committees to look away from the tried-and-tested markets of Shanghai and Beijing.

However, the GBA is a project that will evolve over the next 20 to 25 years, said Chan, and would throw up a variety opportunities during that time.