Knight Frank launches the latest Hong Kong Monthly Report. The CBD recorded limited office leasing transactions, given the scarcity of space, while Kowloon saw robust relocation activity. The en-bloc sales market remained buoyant. Residential sales in February hit a 25-year low, with the market anticipating an increase in supply. The tough environment continued in the retail market, with falling tourist numbers and retail sales figures.
Office
In February, the spotlight in the Hong Kong Grade-A office market was a mega investment deal by a Mainland Chinese firm. State-owned China Everbright Group announced the purchase of Dah Sing Financial Centre in Wan Chai for HK$10 billion, this made the building the second most expensive office tower in Hong Kong in terms of total consideration.
In the leasing market, amid various economic uncertainties, David Ji, Director, Head of Research & Consultancy, Greater China expects Grade-A office rents in core business areas to remain stable this year, given the low vacancy rates and continued demand from Mainland firms.
Residential
According to the Land Registry, in February, residential sales hit the lowest level in 25 years, reaching only 1,807, a plunge of 70.0% year on year. Official figures show that home prices have declined for four consecutive months, back to the level in December 2014.
However, the residential market shows a polarising trend, with the luxury sector remaining resilient, despite continuing property market cooling measures, the recent US interest-rate hike and lukewarm sentiment in the overall market. David Ji expects luxury homes prices to drop only 5% this year, while mass-market prices could drop up to 10%.
Retail
In February, the retail property market continued to be affected by falling visitor numbers, particularly from Mainland. The decline in footfall on prime streets, together with deteriorating consumer sentiment owing to economic uncertainties, has made it increasingly difficult for retailers to boost sales, resulting in further drops in prime street shop rents. Despite the government will expand the scale of major events this year and invest in more tourism infrastructure to boost tourism, it is believed that these measures will be insufficient to combat the tough retail environment resulting from the strong Hong Kong dollar and subdued economic growth.