Real Estate

Hong Kong Property Market Seen Strong Year, Some Localised Dips - Data

Chrissy Coleman Asia Correspondent January 30, 2013

Hong Kong Property Market Seen Strong Year, Some Localised Dips - Data

Hong Kong's property market is seen posting further strong performance in 2013 - albeit with some local variations - as low interest rates and China's rebounding economy acting as drivers, according to Cushman and Wakefield, the real estate services firm.

Confidence in the jurisdiction's market is mainly based on “improved economics and GDP growth in China”, Randall Hall, executive managing director of Greater China, Cushman and Wakefield, said at a press conference this week.

Rising tourist numbers from Mainland China (up 24 per cent last year from the previous) is expected to keep the Hong Kong market growing. Additionally, Hall said Taiwanese insurance companies who have been granted Hong Kong trading licences will snap up properties in due course.

“China’s recovery and its rising domestic consumption will bode well for Hong Kong’s economy is 2013. While this will fuel the trade sector, it will also lure more Mainland Chinese to Hong Kong for both business and leisure,” Hall said.

Overview

According to the firm’s research, in 2012 there were 404 transactions with a consideration above HK$100 million (around $12.9 million), an increase of 53 per cent over the 2011 total. Low interest rates and central bank money printing is spurring investment, the firm said. Moreover, added policy measures including the introduction of the BSD tax, which levies a 15 per cent tax on residential purchases by non-permanent residents and corporate entities, has pushed capital into the non-residential property investment market.

“With interest rates staying low through at least 2013, investors will focus their attention on non-residential properties. There are some concerns that the government could introduce policies to control the market however, as capital values of office, retail and industrial properties have continued their surge and are near or at record highs," Kent Fong, senior director, investment, of Cushman and Wakefield Hong Kong, said.

In light of this situation, the firm said it is inevitable that yields will remain low and prices continue to rise. However, with prices at a record high in some sectors, price growth will be more moderate in 2013.

Office

Collectively, the overall office leasing market slight exceeded expectations in 2012. Demand remained healthy enabling overall office availability to remain below 5 per cent and on aggregate level, rents increase 8.9 per cent, according to the firm.

However, the market remained very much two-sided during the past 12 months – while Greater Central (Hong Kong) experienced a slowdown in demand and a sizeable rental decline ( down 16.8 per cent per square foot per month) as was widely anticipated, other districts saw positive demand, and this underpinned low availability and stable to rising rents, the firm said.

Meanwhile, the Kowloon market continued its rapid expansion in 2012. Storng office demand pushed the Kowloon availability rate to a record low in 2012 and the rate remained below 3 per cent by the end of the year. Kowloon East profited the most, with annual rental growth of 27 per cent. Looking more closely at overall office demand, the amount of new lease area increased 11.8 per cent over the amount recorded in 2011.

Looking forward, Gary Fok, senior director, commercial transaction services at the firm in Hong Kong, anticipates that rents will experience some downward pressure, falling y 10 per cent, but the bulk of the decline is expected to occur in the first three quarters of the year, stabilising towards the end of 2013.

Retail

The retail property market outperformed the other sectors in 2012, however, as retail sales slow. The firm sees a pullback in the expansion of this sector in the market. Although there has been a slight shift from luxury spending by Mainland visitors, luxury brands continue to strive to demonstrate their long term growth strategies for Hong Kong and China by pursuing prime street locations. Prime street shop rents increased by more than 30 per cent and Hong Kong obtained the highest rental ranking globally in 2012. For 2013 Cushman and Wakefield anticipate a 5 per cent annual rental growth rate for this sector.

Land supply

In response to the Hong Kong government’s recent announcement of plans to increase land supply, Vincent Cheung, national director, valuation and advisory of Cushman and Wakefield, Greater China, said: “The government reaffirmed its plans to increase public and private housing supply again during the recent Policy Address, but strategy takes time to implement and the effects will take hold while new housing supply comes to the market.”

 

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