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News from Knight Frank Hong Kong

Robust demand boosts up office price growth in Hong Kong Island

22 November 2017

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.
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.
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.
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.