Demand for smaller units remains robust in Hong Kong property market
The new build residential real estate market in Hong Kong remained robust in December with small to medium sized units continuing to be sought after, the latest property market report shows.
Overall during 2014 some 63,807 residential sales were recorded according to the Land Registry, an increase of 25.9% from 2013 and the first rebound since 2011 after cooling measures were implemented.
The report from international real estate firm Knight Frank also shows that luxury residential sales over HK$10 million or above rebounded by almost 50% year on year, to reach a total of 7,778 sales in 2014.
The firm points out that this robust trend has extended into 2015 when developers remained active in launching new projects, particularly small to medium sized units.
The report also says that in order to tackle Hong Kong’s housing shortage, the government has proposed to increase private home supply to 19,000 units per year in the coming decade.
‘Despite this increase, we still expect to see mild growth of up to 5% in mass residential prices this year,’ the monthly report says.
‘Meanwhile, the potential interest rate rise in the United States and the continuing implementation of government cooling measures are expected to suppress the price growth of luxury flats,’ it explains.
‘More landlords will put their apartments up for lease instead of selling, resulting in an increase in rental supply which will drag down luxury residential rents,’ it adds.
The report also records that the office leasing market was quiet in December, traditionally the slowest time for the market. Grade A office rents remained stable while year on year they are up 2% in major business districts in Hong Kong, up 5% on Hong Kong Island but down 6% in Kowloon.
Sales were down 37% in 2014 compared with 2013, according to official figures but sentiment increased towards the end of the year driven by demand for large office space from end users motivated by cost savings.
‘In 2015 we expect we expect to see this trend continue with increased demand, not only from large banks and insurance companies looking to own their own offices in Hong Kong, but also from small to medium sized firms seeking to buy their own work space to reduce occupation costs,’ the report explains.
‘Looking forward we expect Grade A office rents in CBD areas to remain firm or experience a modest increase of up to 5% in 2015 given the limited supply and sustained demand,’ it continues.
‘Meanwhile, rents in non core districts should remain stable in 2015 with supply abundant, especially in Kowloon East where about three million square feet of new Grade A office space is scheduled for completion this year,’ it adds.