(30 May 2019, Hong Kong) At a press conference held in Knight Frank Hong Kong office this afternoon, Thomas Lam, Executive Director, Head of Valuation & Advisory, Patrick Mak, Executive Director & General Manager, Head of Kowloon Office Services, Wendy Lau, Senior Director, Hong Kong Office Services, David Ji, Director, Head of Research & Consultancy, Greater China, presented their forecasts for Hong Kong and Chinese Mainland’s property markets for 2019.
From left to right: Patrick Mak, David Ji, Wendy Lau and Thomas Lam
Chinese Mainland Residential Market:
David Ji, Director, Head of Research & Consultancy, Greater China says, “With the steady growth of the Chinese economy in the past six months, housing prices in first- and second-tier cities experienced moderate increase. Although the government’s overall policy control on housing market is still in place, some regional controls were relaxed. According to the Greater Bay Area (GBA) plan, the government is pushing for the development of an international innovation and technology hub as well as the improvement of infrastructure and connectivity. These will be the key drivers for the housing markets in the region. In particular, Shenzhen’s housing prices will continue to rise given the rapid expansion of innovation and technology businesses in the city. Housing price in Shenzhen is expected to catch up with Hong Kong in 10 years’ time.”
Hong Kong Residential Market:
Thomas Lam, Executive Director, Head of Valuation & Advisory says that Hong Kong property prices recorded a significant increase in recent months, with a cumulative increase of 5% in the first quarter of this year, reflecting positive property market sentiment. However, external uncertainties such as trade war concerns could cloud market sentiment. We anticipate the residential market to be dominated by first-hand sales in the remainder of this year. Meanwhile, developers are adjusting their sales strategy as some are leasing their projects instead or selling them through tender. Overall, the sales volume of first-hand and second-hand homes are expected to reach 58,000-60,000 cases, approximately amounting to HK$560-570 billion. We expect mass residential prices to remain stable, while luxury and super luxury home prices to increase by 5% this year.
In the land sales market, due to limited land supply in Hong Kong, developers are still keen to acquire land plots in prime locations and we expect the total land sale revenue to reach HK$120-130 billion this year. (In 2018/2019, the total land sale revenue was HK$122 billion)
Hong Kong Office Market:
Wendy Lau, Senior Director, Hong Kong Office Services says, “Amid the Sino-US trade war and other global economic uncertainties, the wait-and-see sentiment in the market has intensified which has somewhat weakened the office leasing demand. In particular, leasing activities of Chinese Mainland companies, who were major drivers in the past, have visibly cut down their expansion plans with some even relocating out of Hong Kong. With no new drivers in the market, the leasing momentum in Central remains weak. At the same time, a substantial amount of new stock will be available in the next 12 months due to some larger tenants moving out of Central.
Meanwhile, decentralisation to Quarry Bay has seen a slower pace due to the limited availability of large spaces on Island East. Relocations from Central district to Wanchai district remain strong.
Looking ahead, we anticipate a weakened market momentum, sustained decentralisation, and an uncertain external economic environment to drag down the Hong Kong Island office rents by 1% to 4% in 2019.
Kowloon Office Market:
Patrick Mak, Executive Director & General Manager, Head of Kowloon Office Services says, the overall economy is slowing down and office demand is softening. However, it does not have a significant impact to the Kowloon office market as rents in Kowloon are relatively more competitive hence we still see cost cautious companies looking to move, setup or expand in Kowloon.
Office supply is a key factor affecting the market. In 2019-2023, Kowloon will see over 13.6 million sq ft of office supply completing. This is almost half the size of the Central office space volume and the main factor that is dragging down the potential rapid rent growth in Kowloon.
Combining the incoming demand and supply, we forecast that office rents in Kowloon will not go up as much as the previous years. We expect office rents in centralised Kowloon to increase by a mild 1-3% and decentralised Kowloon will see an even milder 0 to 2% rental growth in 2019.
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