Knight Frank launches the latest Hong Kong Monthly Report. In June, the Grade-A office leasing market remained robust—in Central in particular—with continual expansion demand coming from Mainland financial institutions. In the housing market, home prices grew further with sales volume continuing to rebound, especially in the primary market. Meanwhile, the retail property leasing market remained subdued, with most transactions involving small floor plates and mid-tier retaliers.
Grade-A Office
The Grade-A office market remained active in June, driven by continual expansion demand from Chinese financial institutions, most notably fund and asset management companies.
In Central, there was strong demand for office premises. In Kowloon, Grade-A office leasing demand mainly involved relocations. Another notable trend in the Kowloon Grade-A office market has been an increase in polarisation. On the one hand, demand has remained strong for offices in convenient locations near the railway. On the other hand, offices located farther away from public transport facilities are not as popular and taking longer to be leased out.
Looking ahead, David Ji, Director, Head of Research & Consultancy, Greater China at Knight Frank expects Grade-A office rents in Central will continue rising steadily in the second half of 2015 and rents will remain firm in prime developments in Kowloon East.
Residential
According to the Rating and Valuation Department, housing prices in Hong Kong reached a record high in May, increasing more than 20% compared with the same month last year. The transaction volume of new homes reached over 8,700 for the first half of 2015, a result of strong housing demand.
Amid positive market sentiment, property developers have been actively acquiring residential sites this year, in line with the government’s target to boost housing supply. In the third quarter, the government will release three residential sites for sales. It has indicated that additional land may be launched by the end of September. The annual private housing supply target of 19,000 flats is considered achievable this year.
Despite the rising supply, David Ji expects home prices to continue rising this year, as it will take time for the new sites to be developed into flats.
Retail
The retail sales value registered negative year-on-year growth for three consecutive months from March to May, but the pace of decline is slowing. Last month, with rents in prime retail districts softening, mid-range retailers gained opportunities to enter high-profile streets at lower rents.
Looking ahead, David Ji does not expect retail sales in Hong Kong to recover in the near term. Prime retail rents will continue to come under downward pressure for the remainder of the year.