HONG KONG - The outlook for real estate investment and development in Hong Kong is generally favorable in the next year, although this sentiment is tempered by the high costs for both commercial and residential properties, according to a joint report released by the Urban Land Institute (ULI) and PricewaterhouseCoopers (PwC) Monday.

The report, titled Emerging Trends in Real Estate Asia Pacific 2013 provides an overview of Asia Pacific real estate investment and development trends, real estate finance and capital markets, and trends by property sector and metropolitan area.

Of the 22 markets included in the report, Hong Kong is ranked 11th for investment prospects and 10th for development prospects. Hong Kong's Grade A office space is among the world's most expensive, despite a recent decline in rents and softening in capital values caused by weaknesses in the financial sector.

However, the report said that the scarcity of prime institutional-grade office disposals continues to make buying such assets both difficult and expensive.

There is a growing momentum for businesses to move staff away from the traditional central business district area, which has become overcrowded, to secondary locations such as Kowloon, where rents are more affordable and subject to lower increases, said the report.

For the Asia Pacific region in general, the report notes that steady economic growth, rising incomes, and stable or increasing property values are all contributing to an outlook that is optimistic, but cautious, due to concerns about prime assets in key markets becoming overpriced.

"Although the overall tenor of investor sentiment for this years' survey reflected a degree of apprehension over real estate investment prospects for the coming year, the mood as indicated by survey ratings of individual cities was rather more bullish, with higher scores awarded this year for most surveyed markets than one or two years ago," said KK So, Asia Pacific Real Estate Tax Leader for PwC China.

Hong Kong's housing prices are among the world's highest. Hong Kong's government has introduced further tax increases, aimed at curbing speculative housing investment, which may switch the focus of real estate investments to commercial property assets in Kowloon, he said.

Jakarta, Shanghai, Singapore, Sydney and Kuala Lumpur are the top five investment markets for 2013 predicted by the report. In addition to Shanghai, Beijing and some other cities were also placed in the top ten listing for both investment and development prospects.

The report is based on the opinions of more than 400 internationally renowned real estate professionals, including investors, developers, property company representatives, lenders, brokers and consultants.