Knight Frank launches the latest Hong Kong Monthly Report. The activity level rose after Chinese New Year in the Grade-A office market. Residential sales volume rebounded in February, with both sellers and buyers returning to the market. Visitor arrivals and retail sales figures recorded a significant improvement in January.
Grade-A Office
In the past few months, there were a number of major leasing transactions involving relocation from Central to Quarry Bay. Even though some firms are moving out, Central’s office rents continued to approach record highs. David Ji, Director, Head of Research & Consultancy, Greater China, expects Central rents to continue outperforming the market and increase 5-7% in 2017.
In Kowloon, the leasing market become active after Chinese New Year, with a number of transactions involving relocations. Looking ahead, David Ji reiterates his view that office rents in Kowloon will face downward pressure in the coming year, as abundant supply will prompt landlords to offer more discounts. Nevertheless, leasing activity is expected to remain robust as the decentralisation trend continues.
Residential
Residential sales rebounded 24% month on month in February 2017, with the comeback of both sellers and buyers after the Lunar New Year holiday. More new flats were launched during the month, with developers offering various sweeteners to offset the impact of the Stamp Duty rise. The secondary market remained relatively quiet, resulting in stable home prices during the month. The luxury residential market remained active.
The Budget echoed the Policy Address in reaffirming the government’s determination to increase housing supply in the coming decade. While abundant supply will suppress price growth, high land prices and strong housing demand will lend support to prices, which are expected to rise a mild 5% in 2017.
Retail
Hong Kong’s visitor arrivals in January 2017 rose for the second consecutive month, attributable mainly to the number of Mainland travellers to Hong Kong, which recorded positive growth for two months in a row. Retail sales in January also saw continued improvement, this reconfirmed our expectation of the bottoming of the local retail market in the first quarter of this year.
With retailers continuing to adjust their business focus, the retail market has evolved further towards a new normal, with the focus shifting further from luxury to widely-affordable products.
David Ji remains optimistic about Hong Kong’s tourism market. The retail market is set to rebound along with the tourism market in the coming months.