Residential property sales in Hong Kong up over 40% month on month in December

Residential property sales in Hong Kong rebounded in December, up 43.1% from the previous month, according to data from the land registry.

A total of 2,153 primary residential sales transactions were recorded, more than doubling those in November, while secondary home sales increased 6.4%.

The data also shows that in December, over half of new home sales involved three major developments: Capri in Tseung Kwan O, The Bloomsway in Tuen Mun and Yuccie Square in Yuen Long.

The latest monthly Hong Kong review report from international real estate firm Knight Frank points out, however, that total residential sales volume for 2015 was still down 12.3% from 2014, with primary sales dropping only 0.2% and secondary sales losing 16.6%.

The report suggests that both landlords and buyers held a wait and see attitude amid various uncertainties in both local and external markets.

The housing supply target in the coming 10 years was reduced from 480,000 to 460,000 units, according to the Transport and Housing Department, as the projected number of new households during the period was less than previously forecast.

‘With the US interest rate hike and a projected increase in housing supply, home prices are expected to come under pressure this year. We expect luxury home prices to fall up to 5%, while mass residential prices could decrease by 5% to 10%,’ the report says.

When it comes to the office market, the report explains that, facilitated by various policies to enhance cross border financial integration, mainland Chinese financial firms expanded rapidly in Hong Kong’s CBD, driving up Grade-A office rents in Central by as much as 13.7% in 2015.

In December, for instance, a Mainland firm secured a 14,773 square foot office space in Cheung Kong Center in Central and Kowloon East continued to see robust leasing activity, with many companies relocating from Hong Kong Island and other business districts to the area, attracted by the abundant supply of cost effective new space.

The Knight Frank report suggest that in 2016 landlords will face pressure in rental negotiations as they compete for tenants to drive down vacancies. This comes on the back of a year in which the office sales market improved, with the total volume and value of transactions rising 21.7% and 49.6% respectively, driven by increased demand from both investors and owner-occupiers seeking to reduce rental costs.

However, the report point out that some Mainland firms which had actively taken up Grade-A office space run into various problems. For example, some delayed renovating the space they had let, while others failed to take up the units at the start of the lease term. There were even cases of firms exiting their Hong Kong business.

‘However, with limited supply in core business areas, we still expect their vacancy rates to remain low and their rents to rise by 5% this year. In decentralised areas, however, rents could drop by up to 5% in 2016,’ the report adds.

In the retail sector is says that for the first 11 months of 2015, Hong Kong’s retail sales decreased 3.1% year on year, as a result of a slowdown in inbound tourism. Luxury goods retailers suffered the most, with a 15% decline in the sales of the jewellery, watches, clocks and valuable gifts category.

As a result, luxury goods retailers remained cautious in shop leasing, while mid-end retailers became increasingly active in prime streets. Sportswear labels, for example, saw active expansion in 2015, especially in Central. Adidas

It also explains that with the availability of the most up to date and exclusive limited edition products, Hong Kong is an important retail hub for international sportswear brands. ‘The increasing appeal of a healthy and sporty lifestyle, the growing popularity of sportswear as smart-casual apparel and the rise of wearable tech are likely to further boost the expansion of sportswear retailers, especially in Central where there is a concentration of fitness centres,’ it points out.

‘We expect mid-end retailers to continue to dominate the retail leasing market. Rents of prime street shops will continue on their downward path this year, while shopping centre rents will remain firm, with mild increments, especially those in non-core shopping areas focusing on mid-end products and necessities,’ it adds.