Hong Kong MPF Plans more than Double in a Decade

The average accrued benefits held by Hong Kong’s Mandatory Provident Fund (MPF) plan members have more than doubled over the past 10 years, from an average of HK$68,000 ($8,700) in 2006 to HK$154,000 in 2016, the fund reported.

The MPF reported that at the end of 2016, the total asset value of the fund was HK$6.46 billion from the 4.19 million members, and that approximately 30,000 accounts had accumulated more than HK$1 million

“We are pleased to see the steady growth in the amount of MPF held by scheme members,” said an MPF spokesperson in a statement. “The report shows that the amount of voluntary contributions has increased significantly over the past decade.”

The MPF system is an individual savings account arrangement, under which contributions paid by or on behalf of members are used to purchase units of MPF funds, which are accumulated in the member’s account, as are any returns generated by the MPF funds.

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Over the past 10 years, the MPF has reported rapid growth in the amount of voluntary contributions made to MPF plans. From 2007 to 2016, the total amount of voluntary contributions nearly tripled, to HK$9.49 billion from HK$3.56 billion. As a percentage of total contributions, voluntary contributions rose to 14% from 11% during this period.

The report also found that there was a gender gap among members’ benefits, which widens with age. The average accrued benefits of male members were HK$169,000, 22% higher than those of female members, who had average accrued benefits of HK$139,000. And male members aged 60 to 64 had an average of 65% more accrued benefits than female members in the same age range. However, the accrued benefits of female members aged 25-29 were slightly higher than those of male members in the same age group.

Approximately 38% of accounts had accrued benefits below HK $10,000, while 29% accrued benefits between HK $10,001 and $ HK 50,000, and 23% accrued benefits of HK $50,001 to HK $200,000. Nearly 10%, or approximately 870,000 accounts, had accrued benefits of more than HK$200,000, and nearly 2%, about 140,000 accounts, had accrued benefits of more than HK$500,000.

Tags: China, Hong Kong’s Mandatory Provident Fund, Pension, Report

Abundant capital is flowing into the commercial real estate space, according to Avison Young, with lack of product for sale pushing up prices and causing some investors to expand their investment horizons, taking on more risk.

“The commercial real estate sector remains awash in capital; and despite varying global economic, political, and property market conditions, including the ongoing interest-rate scenario, there is no better place to put your money than in hard assets,” said Mark E. Rose, CEO of Avison Young. “In short, real estate has established itself as a real alternative asset class to stocks and bonds.”

The Toronto-based commercial real estate services firm reports in its fall 2017 commercial real estate investment review, covering activity in the first half of the year in North America and Europe, that the US saw a 12% drop off in activity in the first half of 2017, compared to the 2016’s first half, with investments down in 21 of 40 markets. Investors were interested in multifamily and office properties, and the industrial sector attracted more investment capital compared to the first half of 2016.

Foreign investors continue to be interested in US commercial real estate properties, with Canadian investors ahead of others, having overtaken the Chinese. Investment from other Asian countries such as Japan, Singapore, and Hong Kong went up.

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“A 12% year-over-year reduction in transaction volumes is significant, and it illustrates the disconnect between seller expectations and buyer underwriting occurring in many markets across the US,” noted Earl Webb, Avison Young’s president, US operations. “This disconnect is somewhat in conflict with the broad improvement in market fundamentals that the US continues to register.”

He added that there is still strong competition for “institutional-quality assets” that is pushing up values. In fact, 16 of 40 US markets that Avison Young serves saw sales volume of higher than $3 billion, with Los Angeles and New York leading the list. San Francisco saw the highest rise in investment sales activity, which was up 73% compared to 2016.

Cap rates for all property types across all markets in the US were flat at 6.5%, compared to 2016, considering that there was a rise in retail cap rates that offset a slight decline in cap rates for office, multifamily, and industrial properties.

In Canada, there was a year-over-year rise in investment sales in the first half, with dollar volumes higher in five of six markets in the survey. While most of this capital was attracted to the office sector, the retail sector saw the highest increase from the 2016 period.

Tags: Avison Young, Real Estate, Report