Knight Frank today releases the Greater China 2016 first quarter (Q1) Report which looks at the Grade-A office, luxury residential and prime retail property markets in Beijing, Guangzhou, Hong Kong, Shanghai and Taipei. During Q1 2016, real estate markets in major Mainland cities continued to benefit from a loosening monetary environment and measures to clear housing inventory. Meanwhile, the Hong Kong and Taipei markets continued to be impacted by government cooling measures. Looking ahead, the Mainland residential market will continue to see growth in both sales volume and prices, while house prices in Hong Kong and Taipei will continue to drop.
Grade-A Office
In Q1 2016, the Grade-A office markets in major Greater China cities continued to perform well. Beijing continued to witness robust demand, with both prices and rents seeing moderate growth. In Shanghai, the market remained active. Office sales surged in Guangzhou, benefitting from policy relaxation since 2015, which in turn lifted prices. In Hong Kong, Grade-A office rents and prices continued their upward trend, driven mainly by demand from Mainland firms. In Taipei, Grade-A offices in Xinyi remained sought after by foreign firms and high-tech companies.
Looking ahead, huge amounts of new supply are likely to put downward pressure on rents in the three Mainland cities and Taipei. In Hong Kong, the market is expected to continue to polarise, with rents rising in core areas where availability is limited and dropping in decentralised districts with abundant supply in the pipeline.
Luxury residential
Luxury residential markets in Mainland’s major cities remained upbeat in Q1, amid a loosening monetary environment. Among the three first-tier cities, Shanghai led the price growth, followed by Beijing and Guangzhou. In March, the government tightened mortgage leading to curb the price surge.
In Hong Kong, sales of luxury homes worth HK$10 million or above plunged 62% year on year in Q1. Although luxury home prices overall are expected to drop 5% this year, prices of super-luxury houses and apartments should remain firm. Taipei’s luxury residential market was quiet in Q1 because of the newly implemented capital gains tax scheme, which reduces the expected return from luxury home investment.
Prime retail
In Q1, the Mainland retail market continued to face challenges from the rise in e-commerce and abundant retail property supply. International luxury brands continued to consolidate their retail networks. Prime retail rents in major Mainland cities remained stable or dipped slightly. Looking ahead, the new tax regime for e-commerce purchases abroad, which took effect in April, will make it more expensive to buy high-end products from e-retailers, which is expected to benefit bricks-and-mortal operators.
In Hong Kong, with both Mainland visitor numbers and retail sales value declining, the high-end luxury retail sector continued to shrink. Prime street shop rents are likely to continue to decline in the coming 12 months.