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News from Knight Frank Hong Kong

Kowloon to offer plenty of affordable leasing options

17 February 2017

Knight Frank launches the latest Hong Kong Monthly Report. The Hong Kong Island Grade-A office market was active even during the holiday season last month with tenants acting fast to compete for the scare space. Stamp duty rate rise and seasonal effect further dragged down home sales volume in January, but prices remained stable. The retail market is expected to bottom during the first quarter of 2017 as the market evolves towards a new normal.

Grade-A Office
On Hong Kong Island, with high rental levels and a lack of space in Central, relocation trend is expected to continue for cost saving. The extremely tight availability has also prompted large companies to study their office leasing plans in advance and make pre-lease decision early. 
In January, there were not many major leasing transactions in Kowloon and activities remained subdue with the approach of the Chinese New Year festival. However, the market is expected to revive in the coming months, in particular Kowloon Bay, where a number of sizeable transactions involving over 10,000 sq ft of space were in concluding stage.
David Ji, Director, Head of Research & Consultancy, Greater China, expects Kowloon office rents to continue facing pressure in 2017, in particular Kowloon East where rents could drop more than 5% given the abundant supply. 
Residential sales dropped further in January 2017, down 7.4% month on month, resulting from the combined impact of the stamp duty rise last November and the seasonal effect during the Chinese New Year period. Home prices, however, did not drop along with transaction volume but continued to grow, at a pace much slower than previous months. Primary sales are expected to rebound in the first half of the year. 
The US Federal Reserve has decided to keep the interest rate unchanged in the Janaury meeting. David Ji expects such hike to remain mild this year. However, economic uncertainties and abundant supply in the pipeline will suppress residential price growth in 2017.  
Retail sales showed a narrower year-on-year decline, down 2.9% in December, compared with 5.4% in November and 8.1% for 2016 as a whole.
The leasing market remained relatively quiet during the Christmas and Lunar New Year period. Looking ahead, early signs of a resurgence of inbound tourism and retail sales recovery are expected to boost retailer confidence. The market is expected to bottom during the first quarter of 2017 as the market evolves towards a new normal.