Home sales in Hong Kong continue to rise with buyers and sellers active

Residential real estate sales in Hong Kong increased month on month in March, with the return of both sellers and buyers, the latest property market review shows.

It means that the market has now absorbed the negative impact of the rise in the stamp duty rate that was introduced in November 2016, according to the report from international property firm Knight Frank.

The report explains that despite another interest rate rise in the United States, residential sales rose another 44% month on month in March 2017, with a comeback even although an abundance of new flats were launched during the month.

Developers in Hong Kong continue to offer various sweeteners to boost sales and while the secondary market remained relatively quiet, a number of record breaking deals were recorded, resulting in further growth in home prices.

Official data show that home prices went up in the 11 months ending February 2017, gaining an accumulated 15%. The stamp duty levy on first time buyers purchasing multiple flats in one go is not expected to drag down home prices, as these transactions make up less than 5% of total sales.

The report suggests that some developers could offer further sweeteners to counter the impact of the levy and the number of new homes coming to the market is unlikely to fall as the latest figures from the Rating and Valuation Department confirm increasing housing completions in the coming years.

‘While abundant supply and interest-rate rises will help suppress price growth, high land prices and strong housing demand will lend support to home prices, which are expected to rise a mild 5% in 2017,’ the report says.

Meanwhile, in the commercial market office availability on Hong Kong Island remained very tight in core business districts with the report explain that landlords remained aggressive, offering little room for rental negotiation, thus further pushing rental levels upwards.

Although China tightened capital outflow controls in late 2016, mainland companies remained the most important source of new take-up in Central. For example, HNA Group reportedly leased over 80,000 square feet in Exchange Square previously occupied by BNP.

However, a number of multinational corporations and professional services firms traditionally located in Central were relocating to non-core areas to reduce costs. ‘We expect the tenant mix in Central to continue to change, with more mainland firms taking up the space vacated by Western firms,’ the reports says.

In Kowloon there were not many major leasing transactions in March but interest remained strong, with one of the demand drivers involving the consolidation of companies as a result of M&A activity.

The report points out that with its availability of large floor space, Kowloon East has become popular for companies looking to consolidate their business operations in a single location. A number of cases involving large floor space of more than 30,000 square feet now under negotiation are expected to be concluded in the coming months.

‘They will set the benchmark for future rental levels in the area, with landlords referencing these large transactions while reviewing their market positioning strategies,’ the report added.