Residential property sales in Hong Kong increased by almost 40% in August with the market seeing particularly strong activity in the new homes market.
The latest data from the Land Registry recorded a rise in sales of 37% month on month while prices also continued to increase. But prices are still down 8% from their peak in September 2015.
According to the latest monthly analysis from international real estate firm Knight Frank a number of primary projects offering small flats had strong sales in August. For instance, Ori, in Tuen Mun, sold over 80% of its 370 units in the first batch of sales, while the met BLOSSOM, in Ma On Shan, managed to sell all its 260 units on the first day of its launch.
Knight Frank says that developers are expected to offer more small flats to meet market demand in the coming months. This will be boosted by land prices stabilising and major developers returning to the market amid satisfactory home sales performance.
The report points out that one notable sale, a domestic site in Castle Peak Bay, Tuen Mun, was acquired for HK$4,085 per square foot, up 22% from two months ago when the adjacent site was sold.
According to the Lands Department, the number of homes pending pre-sale consent reached 14,757 recently, the highest level in 10 months.
‘We expect growth in home prices to remain suppressed despite the recent pickup in sales momentum, given the increase in supply and a potential US interest rate hike,’ the report says.
The report from Knight Frank also shows that the central’s Grade-A office market remained quiet last month, probably due to a lack of available space. The launch of Shenzhen-Hong Kong Stock Connect by the end of the year is set to boost demand further in the CBD
Currently vacancy rates remain very low across main business districts. Central’s vacancy rate, for example, stood at 1.6% in August and has remained under 2% for 14 consecutive months.
Office leasing in Kowloon, in contrast, remained active, although expansion from insurance companies slowed down after the previous boom, the report points out. ‘With abundant upcoming supply, landlords are offering more rental discounts and incentives to attract and retain tenants,’ it adds.
In August, China approved the launch of Shenzhen-Hong Kong Stock Connect, which will likely come into operation in December. This is expected to increase office demand in Central from Mainland financial institutions, which will provide further rental support given the tight availability.
But the firm believes that the situation will be different in decentralised areas. Kowloon East, for example, will see an office supply boom of around two million square feet in 2017. ‘As a result, we expect office rentals in the area to continue facing downward pressure in the coming year,’ it concludes.