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News from Knight Frank Hong Kong

The six new measures unlikely to cool home prices

24 July 2018

Knight Frank launches the latest Hong Kong Monthly Report. In the office market, pre-leases for Central Grade-A offices next year received multiple offers. With limited space available in Tsim Sha Tsui, demand is expected to shift gradually to Hung Hom. In the housing market, home sales rebounded 21.6% month on month in June with prices continued to rise. The six new housing measures tabled by the government are not expected to cool home prices. In the retail market, leasing demand from the F&B sector remained strong, as experience-based retail is gaining traction.  

 
Grade-A Office
Hong Kong Island
 
Grade-A office leasing demand in Central remained strong in June. Some pre-leases for next year have received multiple offers, indicating that tenants are willing to commit to future lease way before the expiry of existing lease. With pre-leases driving down the vacancies of Central and its proximity in the foreseeable future, rents in the area will continue to increase.
 
Located right next to Central, Sheung Wan sees even lower office vacancy at 0.8%, while Admiralty’s vacancy is comparatively higher at around 2.6%.
 
Kowloon
 
Due to limited space available and persistent demand, Grade-A office rents in Tsim Sha Tsui increased 6% in the first half of 2018. Since the West Kowloon Express Rail Link (XRL) terminal is scheduled to commence service in the third quarter of this year office rent in Kowloon Station area is expected to be ramped up as demand increases. In Kowloon East, the relatively affordable rents and large floor plates available are attracting existing as well as new tenants.
 
Residential
 
Residential sales rebounded 21.6% month on month in June to 6,173 units, thanks to improved primary sales. Secondary sales, meanwhile, remained stable, having recorded over 4,500 transactions in a month for three consecutive months. According to official data, residential prices have grown for 26 consecutive months, the longest period of price rises in Hong Kong history, rising 25% from the previous peak in September 2015.
 
The leasing market saw robust activity in May and June as families aim to settle into new homes before the next school year starts. Luxury residential rents grew 4.7% in June compared with a year ago. Despite the new housing measures in place, we still expect residential prices to increase steadily during the second half of the year. Secondary sales volume will be somewhat flat in the short term, with more potential buyers shifting to the primary market. 
 
Retail
 
The overall retail performance in the city was stable in June. Growth of retail sales has been in double-digits for four consecutive months. Vacancy of prime streets shops decreased at a faster pace, but there has been no remarkable pick up in rents. Despite the prevalence of online shopping, there has been sustained leasing demand from the F&B sector, as experience-based retail such as restaurants cannot be replaced by online shopping.
 
It remains to be seen whether there will be an influx of Mainland F&B groups to the Hong Kong market, as the retail landscape in Hong Kong is widely different from that of the Mainland in terms of culture, consumption habit and preference.