Knight Frank launches the latest Hong Kong Monthly Report. Transactions for Hong Kong Island Grade-A office remained active, while market activity in the Kowloon office market returned to normal levels in October. Home sales recorded over 5,000 transactions for two months in a row. The “Starter Homes” Pilot Scheme is expected to have a limited impact on the residential market. Retail sales value sustained positive growth for the seventh consecutive month.
Grade-A Office
Hong Kong Island
Transactions for Hong Kong Island Grade-A offices remained active. The average transaction price for Grade-A office space was up by 3.6% month on month in October and 18.6% in the first 10 months of 2017. With sustained office demand and limited new supply in the coming three to four years, David Ji, Director and Head of Research & Consultancy, Greater China says, we expect transaction prices for Hong Kong Island Grade-A office to continue to increase steadily.
Kowloon
The number of Kowloon office leasing transactions declined further in October, with office rents remaining unchanged. Market activity returned to normal levels following a particularly active September. We expect to see more leasing transactions and a rebound in Kowloon office rents in the last two months of 2017.
Residential
Despite dropping 6.0% month on month, residential sales have recorded over 5,000 transactions two months in a row. Primary sales shrank by 35.5% month on month to 1,541 in October, while secondary sales surged 15.7% to 3,748.
While there is a high possibility that the Fed will raise the interest rate again in December, there is still a lot of hot money in the market, so the residential market is not expected to be impacted in the short term. We expect prices to grow 6-8% for luxury homes and 11-13% for mass residential units in full-year 2017.
Retail
Visitor arrivals increased by 4.8% year on year in September 2017, led by strong growth of 7.2% in the number of Mainland visitors.
Retail sales value sustained positive growth for the seventh month in a row, gaining 5.6% year on year in September.
Despite the stronger performance in retail sales, there were more adjustments in street-level retail rents in core districts, with some branded shops relocating within the same district for lower rent to cut costs.
In conclusion, we remain confident of a gradual recovery in tourism and local consumption. We expect the retail market to remain stable for the rest of 2017.