Knight Frank launches the latest Hong Kong Monthly Report. Strong demand and limited prime office supply continued to cause low vacancy in Central. Meanwhile Central Grade-A office rents rose 3.6% in the first three quarters of 2017. Leading MNCs continued to look for premium office space for consolidation. In the residential market, home sales surged 40.2% month on month in September, driven by first-hand sales. We maintain our view that prices will grow 5-10% for luxury homes and 10-13% for mass reidential units in 2017. The retail market continued to recover on the back of improved tourists’ numbers. Retail sales value and market sentiment are expect to improve in the remainder of 2017.
Hong Kong Island
Continued demand from MNCs coupled with low availability sustained a 3.6% growth in the first three quarters of 2017. Apart from large corporates, co-working office providers also intensified their search for office space on Hong Kong Island. David Ji, Director and Head of Research & Consultancy, Greater China says, this trend will continue as they are taking up major floor space in areas such as Sheung Wan and Causeway Bay. We maintain our view that Central office rents will increase by 5-7% in 2017.
The volume of Kowloon office leasing transactions dropped 40% month on month in September, reflecting the impact of the slowdown during summer months. This figure is likely to pick up in the remainder of the year. However, there has been reduced relocation demand from the Hong Kong side and new offerings in Kowloon also lead to intensified competition amongst landlords. Rental level therefore will remain under pressure, with a 7-10% drop by the end of the year.
Residential sales rose 40.2% month on month to 5,629 units in September 2017, despite that some first-time buyers were staying away pending new housing measures to be tabled in the CE’s Policy Address. The latest official statistics showed that home prices were still rising albeit up only 0.4% month on month in August. Primary sales continued to dominate the market last month.
The Government is actively considering different options for increasing land supply and formulating a sustainable long-term housing strategy. A mild increase in interest rate is not expected to have any noticeable impact on mortagage loan repayments and purchasing power in the short term. We maintain our view that prices will grow 5-10% for luxury homes and 10-13% for mass reidential units in 2017.
Visitor arrivals grew by 1.9% year on year in the first eight months of 2017, led by a mild growth of 1.9% of Mainland visitors arrivals while same-day visitors numbers dropped slightly by 0.4%. Meanwhile, Mainland overnight visitors number rose 5.2%. The Mainland’s GDP growth has continued to beat market expectation. This will impact traveling behaviour of the Mainland visitors and directly benefit Hong Kong’s tourist industry.
Retail sales continued to improve with volume gaining 2.7% year on year in August, growing six months in a row. Most major categories saw positive growth, in particular the category “jewellery, watches and clocks, and valuable gifts” which grew 7.3% year on year.
Retail sales value and market sentiment are expect to improve in the remainder of 2017.