Mid-term Report Card
Where does Hong Kong’s property market stand half way through the year?
| Text : Elizabeth Kerr | Photo : www.thinkstockphotos.com |
September, in real estate terms, means a few things. One of those is mid-year reports. This is the time when all the major developers and property agencies are tallying figures for the year through to July and trying to estimate where things are headed. So what do Hong Kong’s numbers say? Is it time to invest in a home or pack up and move someplace cheaper — with more to choose from?
Other than the obvious (prices are high) the Land Registry says overall property registrations in July (which usually means the sales period ended in June) reached a 31-month high, just shy of 17,000 for $80 billion worth of transactions. The 30 percent jump in activity reflects action across the board — private homes, retail space and even parking.
Colliers International’s July Overview stated much the same, going further to detail how office leasing prices increased 8.4 percent and indicated significant office rental growth; luxury prices were up even as volume was down; an anticipated recovery in exports justified a modest growth prediction of 5 to 9 percent in industrial space; and robust local and tourist consumption activity supported a quarterly increase of 5.7 percent in retail space. It would seem all is well in the property world.
As Colliers’ report stated, “Looking forward, the local real estate market is expected to have more room for growth over the next 12 months in anticipation of the further strengthening of occupational demand. The recent consolidation in the sales market is thought to be paving the way forhealthy growthahead.Thekeychallenges are clearly the amount of vacant stock for lease and the prospective pick-up of inflationary pressure. Individual property sectors with below-average vacancy rates might see faster-than-expected rental growth over the near term.”
None of the data takes into account additional cooling measures that are likely to have an impact in September’s registrations and perhaps for the rest of the year. Midland Realty’s Lau Ka-fai agreed with Hong Kong Property chief executive Richard Lee in The Standard that registrations later in the year could drop by as much as 40 percent.
However, much of the activity was, again, in the luxury sector and according to Colliers, the drop off in volume started earlier in the year on the heels of growing uncertainty in European economies and the so-called knock-on effect of the Mainland’s cooling measures in addition to the SAR’s own. Nonetheless Colliers predicts a further 15 percent increase in luxury rental prices over the next year, which will in turn support sales prices. “Given a low interest rate environment, luxury residential capital values will stay on an upward trend, with a prospective upside of 10 percent over the same period.” Ricacorp Properties appears to concur. According to their figures, 50 residential developments produced 39 percent fewer deals, but that almost $40 billion worth of luxury homes were registered — the highest since 1997.
Despite a second quarter drop in price in second hand properties in the second quarter, Colliers didn’t see a downward price adjustment, the “why” of which is simple. “The key reason … was the market resilience in the face of the clear support of improving economic fundamentals, as well as the supply of credit and the sustained low interest rate environment.” The more things change, the more they stay the same.
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