According to the latest report released by Knight Frank, the residential market remained quiet last month, with potential buyers taking a wait-and-see attitude at year-end amid cooling measures and uncertainties in the global economy. Meanwhile, the commercial markets continued to outperform, with robust relocation activity in the office market and the continual expansion of international brands in the retail sector.
Prime office
With the external environment worsening in the European Union and US, the local corporate sector will become increasingly cost-sensitive and more companies will seek to decentralise to cut rental costs. Grade-A office rents in core and non-core districts showed divergent performances in December. While Central and Admiralty saw rents slip 5.0% and 2.3% respectively, rents in Causeway Bay, Wan Chai and Kowloon East remained firm during the month. Looking forward, landlords in core areas will exhibit greater flexibility in rents in the coming months. Those in non-core areas, meanwhile, are likely to remain firm on rents amid rising relocation demand and vaporising vacancies. Grade-A office rents in Central are likely to see a 10–15% correction in the first half of the year, while rents in non-core districts, such as Causeway Bay, Quarry Bay and Wan Chai, will remain firm or see a small growth of 5% over the period.
Residential
Residential sales shrank further in December with continuing uncertainties in the global economy and potential homebuyers and landlords traveling abroad on vacation. Luxury prices and rents declined 0.5% and 2.5% respectivelymonth on monthin December. The primary market outperformed with developers pricing their new developments competitively close to secondary levels. Looking ahead, we believe both luxury prices and rents are likely to fall during the year.
Retail
Thanks to robust retail sales and strong growth in tourist arrivals, Hong Kong’s retail property market outperformed other sectors in 2011. Prime retail rents increased by 19.4% year on year in 2011—the largest growth since 2007. As Hong Kong remains a shopping paradise for Mainlanders, with lower prices and wider product choices, global retailers will continue to look for opportunities to expand in Hong Kong, which will provide firm support to retail rents in prime areas. We expect the average prime retail rent grow about 10% in 2012