China’s economic recovery has been very weak since the pandemic. The renewed real estate crisis threw another spanner in the works, causing foreign investors to dump Chinese stocks in 2023 and 2024. HKREITs, with the bulk of their assets based in Hong Kong and China, weren’t spared and suffered further sell-downs, worse than those seen in 2022 and 2023.
Investing in Hong Kong stocks since the riots in 2019 has been a challenging experience. HK-REITs, in particular, have seen significant declines, which has been discouraging for many investors. Interestingly, however, if you bought those REITs at their IPO, you might be surprised by their results.
If you are an investor in REITs or dividend stocks (and Hong Kong has plenty of them), I strongly suggest taking the dividends you have collected into account when measuring overall returns. This way, you will gain a better perspective on the overall performance.
This is the approach we have been using to calculate investment returns for S-REITs and M-REITs since their IPOs. We will apply the same method to Hong Kong REITs that have been listed for at least 10 years to assess their long-term performance, as short-term market movements can be driven purely by sentiment.
Once again, we assume that David (a fictional character) invests HK$10,000 in each Hong Kong REIT from the day it was listed. Since David is a dedicated income investor, he chooses not to contribute additional funds to subscribe to any rights issues (if any) and is prepared for any share dilution. Additionally, we assume that he neglects to sell his nil-paid rights, even though he could have profited from them.
For example, if David had invested in Fortune REIT during its IPO, his initial investment of HK$10,000 would have decreased to HK$8,400 by December 31, 2024, reflecting a 16% capital loss. However, when factoring in the dividends he received over the years, his total investment would have grown to HK$25,700, representing a +157% total return. This translates to an annualized return of 4.58% from 2003 to 2024. While the return isn’t exceptional, David still benefited from consistent dividend income despite the challenging property market conditions.
If David had invested HK$100,000, his investment would have grown to HK$257,000. Essentially, the more he invests, the higher his returns, and the longer he holds, the more dividends he accumulates. After more than 10 years of investing, here are the top three best-performing Hong Kong REITs for David.
Note: We’ve excluded brokerage costs, currency exchange gains/losses, and any taxes that might apply to foreign investors.
3. Fortune REIT (Annualised return: +4.59%)
Since 2003, a HK$10,000 investment in Fortune REIT would have decreased to HK$8,400 due to significant foreign fund outflows in recent years. However, when factoring in dividends, the total value of the investment would have grown to HK$25,700.
2. Sunlight REIT (Annualised return: +4.72%)
Since 2006, a HK$10,000 investment in Sunlight REIT would have decreased to HK$7,200 due to significant foreign fund outflows in recent years. However, when factoring in dividends, the total investment would have more than doubled to HK$22,900.
1. Link REIT (Annualised return: +10.51%)
The most prosperous REIT in Hong Kong isn’t Prosperity REIT, but rather… Link REIT. Since 2005, a HK$10,000 investment in Link REIT would have grown to HK$31,900 based on capital appreciation alone. When including dividends, the total investment would have cumulatively reached HK$66,800!
In summary, here is David’s overall performance:
Similar to many Singaporean and Malaysian REITs, Hong Kong REITs have also delivered positive returns—except for Hui Xian. In terms of capital appreciation, Hui Xian suffered a massive 91% decline. However, when accounting for dividends accumulated over the years, the overall loss narrows to 43%.
Due to negative sentiment in the Hong Kong and China markets, all REITs—except for Link REIT—experienced capital losses. However, when dividends are factored in, the overall return picture improves significantly. In fact, dividends accounted for the entirety of total returns, offsetting capital losses.
Notably, David did not need to contribute any additional capital to subscribe to rights issues. The table above reflects his actual returns. His investment loss in Hui Xian was easily offset by gains from his other REIT investments. Had he subscribed to rights issues (if any), he would have made even more money, as rights are typically offered at a discount. Most importantly, rain or shine, David continues to receive regular quarterly dividends from his Hong Kong REIT investments.
As you can see, REITs remain a solid option for those looking to build a steady and consistent stream of passive income. However, it’s important to note that you shouldn’t buy or avoid a REIT solely based on the data above, as past performance does not guarantee future results. Having a well-defined investment process is crucial for identifying and investing in the right REITs that can provide both stable passive income and potential capital gains in the long run.
Final reminder! Enrollment for Dividend Machines closes Sunday, 2 March 2025, 11:59 PM. If you’re looking to learn how to invest in dividend stocks and REITs while building multiple streams of passive income, we highly recommend checking out Dividend Machines before applications close! Once the deadline passes, Dividend Machines won’t reopen until 2026. So, if you miss this round, you’ll have to wait a year (or more) before we accept new applications again.
