Knight Frank today releases the Greater China Q3 2015 Report which looks at the Grade-A office, luxury residential and prime retail property markets in Beijing, Shanghai, Guangzhou, Hong Kong and Taipei.
Grade-A Office
In the third quarter (Q3) of 2015, Chinese stock market volatility coupled with growing fears of a slowdown in domestic economic growth led to a slower pace of corporate expansion, hence weighting on Grade-A office rents in major mainland cities. Meanwhile, Grade-A offices prices in Beijing, Shanghai and Guangzhou rose as investing in such properties became increasingly attractive in such a low interest-rate environment. With the completion of more Grade-A office buildings in the cities, rents are expected to face further downward pressure in the future.
In Hong Kong, due to extremely low availability and high rents in core areas, some firms shifted to more cost-effective offices in non-core areas where supply was abundant. This trend is likely to continue next year, with further growth in office rents in core areas. In Taipei, rents are expected to remain stable with huge potential office demand from foreign enterprises.
Luxury residential
In Q3, the mainland residential market picked up gradually amid a series of favourable policies. Luxury home prices gained further in Beijing, Shanghai and Guangzhou, where the markets continued to clear inventories. The favourable policies will continue to benefit first-tier cites, but are less effective in lower-tier cities with high inventory levels and weak demand.
With Chinese and Hong Kong’s stock market volatility and concerns over an interest-rate hike in the US, Hong Kong’s luxury homebuyers tended to wait and see, while secondary landlords were also firm on asking prices, resulting in slight declines in home sales, rents and prices in the luxury market. In Taipei, affected by the cooling measures, the launch of a combined property and land tax and market expectations, the market will show a trend of polarisation in the future.
Prime retail
With the growing popularity of online shopping, the growth of overall retail sales did not stimulate the retail property market. During Q3, prime retail rents and prices in Beijing and Shanghai continued to decline, while they remained stable in Guangzhou. Affected by China’s anti-corruption campaign, mainland visitors shifted to mid-end products, resulting in a deteriorating retail sector in Hong Kong. With fewer visitors in prime retail locations, prime retail rents and prices declined in Q3. In the coming year, retail rents in Taipei prime locations are set to remain firm, but those in non-core areas could slightly decrease.