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News from Knight Frank Hong Kong

Residential supply to reach a record high of 96,000 units in the next 3-4 years

25 May 2017

Knight Frank launches the latest Hong Kong Monthly Report. In April, the Kowloon Grade-A office market stood out. In the residential market, although home supply will reach a record 96,000 units in the next 3-4 years, home prices are still set to rise further this year amid strong demand. Meanwhile, the retail market is set to achieve a new normal in the short term and further develop with huge potential in the long run as the city evolves.


Grade-A Office
 
On Hong Kong Island, there were not many leasing transactions due to a lack of space availability, especially in core areas. Office demand in Central’s premium buildings remained strong. As tight availability persists, we expect Central’s Grade-A office rents to continue to rise in 2017, which will further accelerate the relocation of multinational and professional services firms. Mainland Chinese firms are expected to continue to take up this space, increasing their occupancy share of the Central office market.
 
The Kowloon leasing market was very active in April, with more than 100 deals recorded in the month. Most transactions involved relocation to Kowloon East, reconfirming that cost-saving motives remained a key demand driver. Looking forward, David Ji, Director, Head of Research & Consultancy, Greater China, expects the Kowloon office market to remain active, given both robust demand for and abundant supply of large space.

Residential
 
Residential sales rose another 20% month on month in April 2017, reaching 7,060, the highest level since October 2016. According to the Transportation and Housing Bureau, primary housing supply is expected to reach 96,000 flats in the coming 3-4 years, the highest since this data became available in 2004. While on the one hand, abundant supply and interest-rate rises will help suppress price growth; on the other hand, high land prices and strong housing demand will lend support to home prices, which are expected to rise another 5-10% in 2017.
 
Retail
 
Hong Kong’s retail sales rebounded 3.1% year on year in March 2017. In particularly, retail sales of the “jewellery, watches and clocks and valuable gifts” category gained a significant 8.4%. Visitor arrivals in March also recorded 8.8% growth, thanks to a 10.4% rebound in Mainland visitor numbers. 
 
Although these encouraging figures have not yet put an end to the dark period for Hong Kong’s retail sector, they have reconfirmed that the market is continuing to improve. David believes that Hong Kong’s retail market will achieve a new normal in the short term and that it has huge potential to develop, along with Hong Kong’s future evolution.