Property

A review of property market in 2017

As 2017 winds down and we steel ourselves for bursting bubbles (maybe in Hong Kong), rising interest rates, and slower outbound Chinese investment, we take a look back at how the year’s most popular markets fared.


Hong Kong

Near

Right here in Hong Kong, it was another year of the stability instead of the SAR’s notorious volatility. The market was fairly even keeled and predictable, which translates to prices creeping up and only a marginal increase in new stock. Data from Knight Frank indicates mass residential prices climbed 12% in 2017, with luxury creeping up 7%. Even with residential prices rising and transaction volumes falling, Knight Frank predicts 60,000 transactions by year’s end, in a very active market. “The total primary and secondary sales value is expected to reach $550 billion by the end of this year, a 29% increase year-on-year,” said Thomas Lam, senior director and head of valuation and consultancy at Knight Frank. Of that $550 billion, 44% of the overall transaction values on 32% of overall volumes came in the primary sales sector. Given the continuing cooling measures and rigid down payment demands.

You might be interested in:
>> Use of public housing should depend on market demand

As a solution to the alleged housing crisis, the government continued to advocate for smaller homes. As of 2017, 31% of residential stock in Hong Kong is smaller than 400 saleable square feet. And they’re not going away, with “36% of new flats to be provided in 2018-2022 sized below 400 square feet and 4% sized below 200 square feet,” as cited in data from Knight Frank. In addition, premium property remains the second most expensive in the world after the playground of the rich and famous — Monaco, where US$1 million gets you 180 square feet. In Hong Kong it gets you 200. For now.


Property

If there’s a silver lining for wannabe Hong Kong homeowners, it’s in the territory’s farthest flung locations. With non-local developers taking over 90% of residential land sale sites, Hong Kong’s developers have been active in repurposing farm land, particularly given the roughly 25% discount on rural land. According to Colliers International, ongoing infrastructure development has closed the price gap in spots like Wong Chuk Hang and Ap Lei Chau, and New World Development, Sun Hung Kai Properties and CK Asset are hoping for similar results in Lung Tin Tsuen (where New World holds a 24,000-square-foot site), Shap Sze Heung (8 million square feet for SHKP) and Hung Shui Kiu (CK’s 110,000 square feet).

Finally, in leasing, luxury rentals experienced a renaissance in 2017: demand from regional professionals was up and vacancies were down. “Many MNCs have started to hire more Asian expats and the number of PRC staff is also on the rise,” explained Colliers’ senior director of residential services, Letizia G. Casalino.

In Mainland China, despite new restrictions on outbound real estate investment (in August), and purchase restrictions in key cities such as Chengdu, Tianjin, Wuhan, Suzhou, and the expected first-tier stars, the country’s strongest performing markets gained 14.5% (Beihai), 13.7% (Xian), and 11.5% (Chongqing) over the previous year as just a few. Notably, the year’s weakest performers were Shenzhen, Hangzhou, Shanghai and Beijing, all dropping between 0 and 3.3% of their 2016 values. Nonetheless, prices were stabilising in major centres, and lingering inventory — the bane of PRC markets’ the year before — is being absorbed. According to Knight Frank, Shanghai’s 2014 inventory of approximately 13 million square metres dropped to 5 million square metres in 2017.

Related articles:
>> Mainland houses with great landscapes
>> An urbanised property market
>> Wuhan’s new landscape

And far

Japan


Japan

The regional superstar in 2016 was Japan, and it continued to shine in 2017. Savills noted a slow but steady rental rate growth of just over 2% from the year before in Tokyo’s 23 wards and nearly 3% in the big five (Shinjuku, Shibuya, Chiyoda, Chuo and Minato), high occupancy, with rapid redevelopment in Minato-ku’s Toranomon district poised to dramatically transform the old neighbourhood in the near future. “Toranomon has become a hotbed of redevelopment activity in recent years. Though market talk tends to focus on Toranomon’s impressive upcoming office supply… the area is also expecting a heavy influx of residential units,” said Savills’ third quarter Residential Briefing. Overall, housing prices in Japan remained stable and affordable, with an average 0.4% climb in 2017, and primary mass home prices in Tokyo averaging JPY35 million (HK$2.5 million), JPY30 million in the Kansai region, and JPY27 million in Fukuoka.

Investment opportunty in Japan:
>> The Ginto Residences - The Pavilions first Japanese property

Australia


Australia

To 2016, Australia had been one of the most popular investment destinations in the world for Hong Kong and Asian investors, but as prices in preferred first-tier locations, Sydney and Melbourne, flirted with record highs, foreign investment restrictions were enacted to mean the current salad days could be winding down. "Unit prices are heavily influenced by investors, including overseas investors, and the actions being taken by the banks in response to the regulator is certainly now starting to have an impact on investor demand," QBE Lenders' Mortgage Insurance head Phil White told ABC in November.

Related article:
>> Australia's shifting sands

London


London

Finally, the seemingly indefatigable London residential market may have finally hit a wall. Research by Savills and Nationwide suggests that in the 12 months between November 2016 and 2017, price growth dropped dramatically: from 7.1% to -0,6%. The political uncertainty of Brexit, its negative effect on the UK (becoming clearer daily) and weakening buyer sentiment are having an influence — as are tightened mortgage lending policies. Central London could have reached critical mass in 2017, with better value found in its periphery and second tier UK. London’s widening geography pushed up prices in premium corridors, then their fringes, and finally into regeneration areas and outskirts. “In most cases, the up and coming areas have now up and come,” said Savills’ November Residential Property Forecasts. What that means for 2018 is anyone’s guess, but with Savills pushing back on rosy 30% growth fantasies — “The capacity for further house price growth in London is limited” — it will make for an exciting year.

Investment opportunities in London:
>>