Knight Frank launches the latest Hong Kong Monthly Report. The Hong Kong economy improved towards the end of 2014, reflected by the Purchase Manager Index (PMI) in December 2014, which showed expansion for the first time in five months. However, uncertainties over local politics, interest rates and the supply situation will suppress growth in Hong Kong’s property market in 2015.
Prime Office
The office leasing market was quiet in the traditional low season of December. In the office sales sector, the transaction volume dropped 37% over 2014 from 2013, according to official data, but sentiment improved towards the second half of 2014, driven by demand for large office space from end-users motivated by cost savings in the long run.
David Ji, Director, Head of Research & Consultancy, Greater China at Knight Frank, expects Grade-A office rents in the CBD to increase up to 5% in 2015, while those in decentralised areas should remain stable.
Residential
Over 2014, 63,807 residential sales transactions were recorded, according to the Land Registry, an increase of 25.9% from 2013 and the first rebound since 2011 after cooling measures were implemented.
In order to tackle Hong Kong’s housing shortage, the government has proposed to increase private-home supply to 19,000 units per year in the coming decade. Despite this increase, mass residential prices should slightly increase this year, while luxury home prices may remain stable or experience a slight drop, says David Ji.
Retail
In December 2014, two new MTR stations along the West Island Line – namely Kennedy Town and HKU – started operating, pushing up retail rents nearby. In recent months, clusters of bars and restaurants have started to emerge on Davis Street in Kennedy Town and High Street in Sai Ying Pun, which both have potential of being developed into Soho-style areas in the future. The trend is expected to grow further after Sai Ying Pun opens in the first quarter of 2015.
With the consumption pattern of Mainland Chinese visitors continuing to shift towards mid-priced products, mass-market retailers remained active in their expansion plans.
David expects prime street shop rents to drop a further 3-5% this year, while those in prime shopping malls to increase 3-5% due to limited supply.