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News from Knight Frank Hong Kong

Further cooling measures to reduce mass residential sales volume

17 March 2015

Knight Frank launches the latest Hong Kong Monthly Report. Last month, the government continued to demonstrate its intention to tackle the imbalance between housing demand and supply in Hong Kong. The Financial Secretary announced in the 2015-2016 Budget that the Land Sales Program of the year would include 29 residential sites. Meanwhile, the Hong Kong Monetary Authority announced a seventh round of cooling measure to temper the small to medium-sized flat sales market.

Prime Office
 
In February, only a few major office sales transactions were recorded, but there were signs of a return of investors to the market. Grade-A office prices in major business districts have demonstrated more notable growth since the end of 2014. Rent growth is expected to support capital appreciation and we expect investors to continue increasing their focus on the office sales market this year.
 
David Ji, Director, Head of Research & Consultancy, Greater China at Knight Frank, expects Grade-A office rents on Hong Kong Island will continue to increase in 2015, with limited new supply and where vacancy rates will remain low.
 
Residential 
 
Last month, the government announced in the 2015-2016 Budget that the Land Sales Program of the year would include 29 residential sites - mostly located in the New Territories, which will provide about 16,000 flats. Soon after that, the Hong Kong Monetary Authority announced a seventh round of market tightening measures on 27 February 2015. David believes, “further cooling measures could reduce mass residential sales volume, but their prices should remain firm due to strong end-user demand.”
 
Retail
 
In January 2015, total retail sales value plunged 14.6% compared with a year earlier. It is the first double-digit decline in the first month of a year since 2002. And the retail property market recorded only several major leasing transactions last month.
 
With the potential modification of Individual Visit Scheme to restrict mainland visitor numbers, the development trend of the local retail market could be affected by such policy changes. David expects rents in core shopping centres to grow marginally in 2015, while overall rentals of street shops in prime retail districts may edge down by 3-5%.