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News from Knight Frank Hong Kong

Home prices to remain stable with notable rebound in sales

17 October 2016

Knight Frank launches the latest Hong Kong Monthly Report. Grade-A office leasing remained subdued on Hong Kong Island, as activity was limited by the lack of availability. Home sales rebounded further in September. With local consumption remaining resilient, the retail market is expected to bottom out early next year. 

Grade-A Office
Grade-A office leasing last month slowed on Hong Kong Island due to a lack of available space and in Kowloon due to the subdued local economy. However, the sales market was robust with another en-bloc deal recorded.

David Ji, Director, Head of Research & Consultancy, Greater China, expects rental polarisation to continue. Given the tight availability, Grade-A office rents in core areas are expected to further increase in the coming months. Meanwhile, decentralised areas, particularly Kowloon East, are likely to face rental pressure with more supply coming online.

Residential
According to the Land Registry, residential sales in September increased 34.4% month on month, reaching 7,826 units, a four-year high. The gain was attributable mainly to robust activity in the primary market, as more end-users and investors joined the buying spree.

Despite abundant housing supply and a potential interest-rate hike, strong residential demand and developers’ competitive sales packages have resulted in a significant rebound in transaction volume. Home prices, therefore, are set to remain stable over 2016. 

Retail
According to the Immigration Department, Hong Kong welcomed 3.6% more tourists in the first three days of the National Day holiday compared to the same period last year. Despite the moderate increase in visitor arrivals, fewer Mainland shoppers queued up outside luxury shops in prime streets, amid China’s continuing anti-graft campaign, which has shifted tourist interest to mid-range brands. To capitalise on the trend, mid-range brands have continued to increase their presence as rents have fallen.

Looking forward, David Ji expects the change in visitor consumption patterns to continue to drag down tourist-related sales. The short-term outlook for prime street shop rents remains negative. However, local consumption, which accounts for more than 60% of total retail sales value in the city, is expected to remain resilient this year, given the strong labour market.