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News from Knight Frank Hong Kong

2015: the best of times and the worst of times

18 January 2016

Knight Frank launches the latest Hong Kong Monthly Report. The office sector outperformed and the retail sector suffered from slowing down activity. For the residential market, the total residential sales volume for 2015 was down year on year as both landlords and buyers adopted a wait-and-see attitude amid the market uncertainties. 

Office
 
The office sector outperformed the local property market in 2015. Facilitated by various policies to enhance cross-border financial integration, Mainland financial firms expanded rapidly in Hong Kong’s CBD. The office sales market also improved with the total volume and value of transactions rising 21.7% and 49.6% year on year respectively. This was driven by increased demand from both investors and owner-occupiers seeking to reduce rental costs.
 
Given the limited supply in core business areas, David Ji, Director, Head of Research & Consultancy, Greater China at Knight Frank expects their vacancy rates to remain low and their rents to rise by 5% this year. Meanwhile in decentralised areas, rents could drop by up to 5% in 2016. 
 
Residential
 
The US raised its interest rate by 25 basis points in December 2015. Despite this, in his 2016 Policy Address, the Chief Executive repeated his intention to keep the government’s cooling measures in place, though he tabled plans for increasing future land supply.
 
With the US interest-rate hike and a foreseeable increase in housing supply, home prices are expected to come under pressure this year. David Ji expects luxury home prices to fall up to 5%, while mass residential prices could decrease 5-10%.
 
Retail
 
For the first eleven months of 2015, Hong Kong’s retail sales decreased 3.1% year on year, as a result of a slowdown in inbound tourism. Luxury goods retailers suffered the most, indicated by a 15% decline in the sales of the “jewellery, watches, clocks and valuable gifts” category. Therefore, they remained cautious in shop leasing, while mid-end retailers became increasingly active in prime streets. Rents of prime street shops will continue on their downward path this year, while shopping centre rents will remain firm with mild increments, especially those in non-core shopping areas focusing on mid-end products and necessities.