Knight Frank launches the latest Hong Kong Monthly Report. Grade-A office leasing was slow in December, both on Hong Kong Island because of limited availability and in Kowloon owing to seasonal factors towards the year end. In the residential sector, the rise in the stamp duty rate in November dragged down home sales volume in December, but prices remained stable. Meanwhile, improved retail sales and visitor figures towards the year end reconfirmed our forecast that the local retail market should reach the bottom in the first half of 2017.
Grade-A Office
Grade-A office rents on Hong Kong Island continued to go up in December. With the lack of space in Central, some companies were forced to opt for offices outside the CBD, resulting in demand spilling over to nearby areas, such as Sheung Wan and Causeway Bay.
On the Kowloon side, there were not many major transactions in December, as many companies delayed their leasing decisions until after the new year.
Over the year, David Ji, Director, Head of Research & Consultancy, Greater China, expects Central office rents to increase 3-5%, while rents in other Hong Kong Island areas could increase 0-2%. Meanwhile, Kowloon office rents will face further downward pressure, falling by 3-5% in 2017.
Residential
The market started to feel the impact of the stamp duty rate rise in early November. Combined with the low season effect in the holiday season, residential sales plunged 47.3% month on month in December, with sales in all price ranges dropping. Primary sales were quiet in December, with a limited number of new launches, because of the stamp duty rise. Secondary sales were also sluggish. However, the super-luxury sector remained resilient, with a number of major transactions recorded.
The Policy Address announced in January reaffirmed the government’s determination to increase housing supply. Abundant supply, combined with economic and policy uncertainty, may drag down mass residential prices by about 5% this year.
Retail
The market saw strong signs of recovery in inbound tourism in December. According to the Immigration Department, visitor arrivals rose 13.8% year on year during the Christmas holiday. The retail property capital market was also buoyant last month. Fourteen major retail property sales transactions worth over HK$100 million were reported.
Active retail property sales indicate increased investor confidence in the long-term outlook. With the retail market bottoming in March, David Ji expects demand for retail space from new brands to increase in the second half of the year.