Knight Frank launches the latest Hong Kong Monthly Report. In the Grade-A office leasing market, Central continued to outperform. Home sales rebounded slightly in June as the impact of the cooling measure faded. However, home prices are expected to rise at a slower pace. Meanwhile, the retail market recovered further.
Hong Kong Island
Central’s Grade-A office rents continued to outperform other districts, recording a growth rate of 3.5% in the first six months of the year. As Central rents continue to edge higher, cost-conscious tenants are expected to continue to relocate to other areas.
Most leasing transactions in Kowloon involved relatively small units of around 4,000 sq ft in June, focusing on Kowloon East and Tsim Sha Tsui. As the summer holiday approaches, the market is expected to become relatively quiet in July and August.
Residential sales rebounded slightly by 6% month on month in June 2017, with the market having digested part of the cooling impact of policy tightening measures. Home pirices continued on their upward trend. Official data show that they continued to climb in the 14 months ended June 2017, rising over 22%.
Potential buyers have started to feel the impact of rising rates, after the US Fed raised interest rate twice this year and major local banks raised mortgage rates slightly. Combined with the impact of increasing housing supply, which could amount to 18,000 units in the second half of the year, we expect residential price growth to slow down in the coming months. Over 2017, David Ji, Director, Head of Research & Consultancy, Greater China, expects home prices to increase 5-10%.
Hong Kong’s retail sales continued to recover, rising 0.5% year on year in May, the third consecutive month of positive growth. Visitor arrivals have also been rising since March, led by the growth in visitors from the Chinese Mainland.
The retail property sales market has also improved, recording 870 transactions during the first five months of 2017, up 77.6% compared with the same period last year.
The local retail market is expected to continue to recover. Along with the lease expiry and renewal of retail units taken up during the heyday of the retail market before 2014, leasing transactions in the coming months will see narrower rental consessions.