According to the Greater China Property Market 2013 Yearly Review & 2014 Outlook released by Knight Frank, despite the property restrictions implemented by the Mainland government last year, residential sales still recorded double-digit growth in Beijing and Guangzhou and a milder growth in Shanghai over the year. In Hong Kong, home prices remained resilient in 2013 despite the launch of various property cooling measures.
In 2014, on the back of strong user demand, Knight Frank expects that home prices in first-tier cities in China will continue to climb. However, with continued cooling measures and more new supply at competitive prices, the residential market in Hong Kong could see prices softening.
Hong Kong
The residential market was quiet in 2013 with the launch of regulatory measures curbing both demand and supply. Although prices remained resilient, sales volume plunged to a record low, while that in the secondary market also reached a level even lower than that during the SARS-affected 2013. Grade-A offices sales were sluggish in 2013, with very low transaction volumes and slightly dips in prices. Despite unstable global economy coupled with slower sales growth, the retail leasing market still saw moderate growth with growing numbers of Mainland visitors, whose changing spending pattern to the mid-market stimulated the expansion of mid-range brands.
Looking forward, Thomas Lam, Director and Head of Research & Consultancy, Greater China at Knight Frank says, “Residential sales in Hong Kong could drop further in 2014 with continued cooling measures and increased supply. Grade-A office leasing is set to remain stable with sustained demand. Retail sales growth could further slow, resulting in a stable rental environment in the retail leasing sector. Commercial property sales could start to defrost with capital accumulation and the absorption of cooling measures’ impact.”
Shanghai
Despite the release of “Shanghai Seven Articles”, the average price of luxury homes increased by 7.3% year on year to around RMB60,000 per sqm in 2013. Grade-A office rents remained nearly unchanged compared to 2012. Office transactions dominated the property investment market with a total value over RMB30 billion. With e-commerce continuing to expand, growth in the luxury retail industry, the upscale catering industry and the traditional department store industry remained slow.
Regarding the outlook of the Shanghai property market in 2014, Thomas expects the foundation of the Shanghai Free Trade Zone to further benefit all types of properties around it. About five million sqm of Grade-A office supply in Shanghai in the coming three years are set to drag down rents by 2% in 2014. The supply of new retail properties will concentrate in non-CBDs this year. Retail property rents could rise another 5-8%.
Beijing
In spite of the release of “self-use commodity homes” policy in October, luxury home prices still surged 17.1% over the year. The average rent of Grade-A offices edged down 3.6% in 2013, but their prices increased 18.4%. New retail property supply reached 500,000 sqm, with vacancy rate at below 10% and rents remaining stable.
With a stable economy and limited new Grade-A office supply in Beijing in 2014, Thomas expects Grade-A office rents to remain stable at relatively high levels. Amid strong end-user demand and inflation expectations, housing prices are expected to grow further, but at a mild pace. With online shopping continuing to expand, department stores are expected to face tough challenges.
Guangzhou
Residential prices in downtown surged 17% to about RMB30,000 per sqm last year. Office prices were pushed up by about 9% whereas retail rents recorded minor growth.
Thomas expects that downtown home prices in Guangzhou would continue to rise steadily this year due to strong demand and further declined in supply. With about 600,000 sqm of Grade-A offices to be launched, vacancy rate will remain high, suppressing rental growth. New office supply in the investment market will hold prices firm. Rentals in traditional shopping areas will remain high, with no new shopping centre supply there this year.