Knight Frank launches the latest Hong Kong Monthly Report. Grade-A office rents of Central continued trending upwards, while the office rent in Kowloon East will also see mild increase this year. Residential sales jumped 34% year-on-year (Y-o-Y) in February, with the secondary market showing improvement. Growth in the retail sales slowed down in February, although long term prospect is good.
Grade-A Office
Hong Kong Island
Central’s Grade-A office rents grew slowly in February. Central has been a landlord’s market, thanks to low vacancy. Demand comes from financial MNCs, Mainland firms as well as new business entities such as co-working space providers. Positive business sentiment will see Grade-A office vacancy on Hong Kong Island to remain at a low level this year. Meanwhile rents are set to grow further.
Kowloon
The overall Grade-A office leasing market was quiet in February due to the Chinese New Year holidays.
Knight Frank expects the market will improve this year with Grade-A rents of Kowloon East rising about 2%. A land plot on top of the West Kowloon Express Rail Link terminal is slated for sale in the latest Budget. This large potential supply, together with the ICC, is likely to attract tenants from Central by offereing an alternative decentralisation location to other locations on the Hong Kong Island.
Residential
Despite the traditional low season in February, 5,482 residential units were sold, rising 4% month-on-month (M-o-M) and 34% Y-o-Y. Transaction of luxury homes worth HK$10 million or above jumped 26% M-o-M and 55% Y-o-Y. According to official figures, housing prices continued to trend upward, gaining 1.3% M-o-M in January, but slower than December. Luxury home prices, in particular, have risen for 20 months in a row, gaining 15% in total, according to Knight Frank figures.
Meanwhile, the market does not expect US interest rate hikes have a huge impact on mortgages this year. David Ji, Director and Head of Research & Consultancy, Greater China at Knight Frank expects residential prices to go up mildly in 2018.
Retail
Hong Kong’s retail sales totalled HK$44.9 billion in January, rising 4.1% Y-o-Y, slower than the previous two months. However, sales of luxury goods recorded double-digit growth of 10.4% Y-o-Y, reaching HK$8.1 billion.
Mainland visitor arrivals reached 4.1 million in January, down 5.5% Y-o-Y because of the late Chinese New Year this year. Seasonal effect aside, Knight Frank expects that the improved business environment will bring more Mainland visitors to visit Hong Kong in 2018.
The prime street shop leasing market was quiet in February, with rents in core retail districts continued to fall albeit more slowly.