At a press conference held in Knight Frank Hong Kong office this afternoon, Thomas Lam, Executive Director, Head of Valuation & Advisory, Patrick Mak, Executive Director, Head of Kowloon Office Services & Head of Tenant Representation, Greater China, Wendy Lau, Executive Director, Hong Kong Office Services, Martin Wong, Associate Director, Research & Consultancy, Greater China, presented their forecasts for Hong Kong and Chinese Mainland’s property markets for 2021.
Chinese Mainland residential market:
Martin Wong, Associate Director, Research & Consultancy, Greater China, pointed out that residential prices across major Chinese Mainland cities have been growing steadily in the past 12 months and have not been much impacted by the outbreak of COVID-19. Despite stricter policy from the Central Government to prevent market from overheating, we are seeing robust housing demand in major cities as a result of economic recovery and promotion of urbanisation. In 2021, residential prices in top-tier Chinese Mainland cities are forecasted to go up by 2-4% and that of the other cities will grow 0-2%.
Shenzhen, Guangzhou, Dongguan, Zhuhai and Zhongshan are the top five cities that Hong Kong people prefer if they would work and live in the GBA. Residential properties in these five GBA cities have higher growth potential with a reasonable rental return. We expect the overall residential price growth in the GBA will outperform other Mainland cities again by going up 3-5% in 2021.
Hong Kong Residential Market:
Heavily affected by the pandemic and uncertain economic prospects, Thomas Lam, Executive Director, Head of Valuation & Advisory said, the property prices have fallen 4-5% from its peak in 2019, which is less than we anticipated. Recently, the first-hand residential sales have been booming, reflecting that buyers' purchasing power remained. We believe this good momentum will carry on to the upcoming year. However, considering the high unemployment rate, economic recession and other factors, which will affect property market in the long run, it is expected that the mass residential property prices in Hong Kong will drop by 5% next year. As for the luxury housing market, number of Chinese Mainland buyers have fallen sharply, hence property prices are expected to adjust downward by 0-5%. If the government does not ease up on the special stamp duty, it will not be able to increase the second-hand residential supply. We believe the transaction volume will remain low. It is expected total residential sales will reach about 56,000-58,000 transactions next year, and the proportion of first-hand transactions will increase to 30%.
This year's construction volume and completion volume have failed to meet the targets due to the pandemic. We estimate that the government's land sales revenue for the 2020/2021 fiscal year will be approximately HK$90 billion, a sharp drop of at least 30% from last year. Whether the target can be achieved would depend on the market responses to Mansfield Road and Central Harbourfront sites.
Hong Kong and Kowloon Office Market:
Wendy Lau, Executive Director, Hong Kong Office Services said, we have found that cost saving, operational efficiency, and employee wellbeing have been the top priorities for companies. Some companies believe that working from home (WFH) works well and are considering reducing their office scale in Hong Kong. On the contrary, some Chinese mainland companies are taking advantage of the current market downbeat environment to accelerate their expansion in Hong Kong, noting the high vacancy rates in core business areas such as Central, Admiralty, and Wan Chai, while landlords softening their stance to retain tenants and are willing to bargain. The proportion of tenants of Chinese mainland banks and financial institutions in the office buildings in Central, which accounted for 3% in 2008, has risen tenfold to nearly 30% now. In addition, in order to improve the quality of their offices, some companies have upgraded to premium Grade-A office buildings while rent is falling.
Affected by the pandemic and economic recession, we expect that in 2021, Grade A office rents in Hong Kong Island will fall by 5-10%.
Patrick Mak, Executive Director, Head of Kowloon Office Services & Head of Tenant Representation, Greater China said, the decentralisation trend continues in Kowloon as some tenants are more price sensitive while Kowloon East offers more office consolidation options. Relocation and consolidation demand support office rent, only a mild rental decline in decentralised areas. We saw a number of multinational brands moving from core Kowloon to Kowloon East and Kowloon West to achieve cost-optimisation. There is an abundant first and second-hand office supply including unabsorbed first-hand supplies, together with replacement stocks and co-working spaces. The total office supply in 2020 adds up to 2.65 million sq ft, which takes around 1.5 years for the market to absorb.
As we anticipate Covid-19 vaccine to be rolled out across Hong Kong by end of first half in 2021, it may lead to a rebound in Hong Kong’s economy. We expect Kowloon office rent to fall moderately throughout the first nine months and see a rebound in Q4 2021, overall Kowloon office rent to slightly increase by 1 to 3% in 2021.
Photo caption:
Photo 1 (From left to right): Wendy Lau, Patrick Mak, Thomas Lam, Martin Wong
Photo 2 (From left to right): Martin Wong, Wendy Lau, Thomas Lam, Patrick Mak