Knight Frank launches the latest Hong Kong Monthly Report. Grade-A office leasing was slow in October, both on Hong Kong Island due to limited availability and in Kowloon due to seasonal factors toward the year end. Meanwhile, the rise in Double Stamp Duty rate is expected to drag down the number of residential sales transactions, but prices should remain steady. In the local retail market, further signs of stabilisation were witnessed, indicated by improved retail sales figures.
Grade-A Office
The Grade-A office leasing market remained quiet on Hong Kong Island, as leasing activities were limited by the lack of availability. There were not many large-scale leasing transactions in Kowloon in October, with companies slowing down their relocation or consolidation plans towards the year end.
Looking ahead, David Ji, Director, Head of Research & Consultancy, Greater China, expects office rents in core business areas to remain high in the next few months, with vacancy rates staying low in most major business districts.
Residential
According to the Land Registry, in October, Hong Kong’s residential market remained active, with sales volume reaching 6,601 units, doubling the level a year ago.
The primary sector continued to dominate, with several new developments oversubscribed in October. The super-luxury sector remained strong. Mainland developers remained active in Hong Kong’s land sales market.
To reign in rises in home prices, the government raised the Double Stamp Duty rate to 15% in early November. The policy is expected to push investors to non-domestic sectors and homebuyers to the primary market, with developers offering various sweeteners to compensate for the tax payment. This, combined with seasonal effects, is expected to slow down residential sales in November and December. Home prices, however, look to remain stable until the end of the year.
Retail
Retail sales value in Hong Kong fell only 4.1% in September, the smallest drop since October last year.
Retailers continued with their downsizing plan, however, with fashion brands continuing to downsize or close their prime street stores.
Looking ahead, fashion and hard luxury brands are expected to continue downsizing in prime streets amid fewer visitor arrivals. Restaurant operators and retailers of consumables are set to continue absorbing the space, taking advantage of falling prime street shop rents. However, if the recent signs of stabilisation in inbound tourism and retail sales prove sustainable, prime street shop rents should reach the bottom in the first half of 2017.