• Colliers Hong Kong releases Strategies for the Residential Market Turn

    21 December 2018

    (20 December 2018, Hong Kong)  Colliers International (NASDAQ: CIGI; TSX: CIGI), a global leader in commercial real estate services, has released its Strategies for the Residential Market Turn report. This research evaluates the immediate prospects of Hong Kong’s residential market and the residential price implications of different scenarios affected by rising interest rates and the moderation of economic growth.

    Hong Kong’s residential market has long been scrutinised as residential prices rose 576% over the past 15 years (July 2003 – July 2018). This year’s decline in the Hong Kong stock market, rising interest rates and US-China trade war suggest that residential prices are finally hitting a turning point. In October 2018, the monthly residential price index declined 2.4% – the largest month-on-month drop in nearly three years (34 months).

    While Hong Kong’s residential prices and rents tend to move together, Colliers observed no direct evidence showing that the change in residential prices leads to a change in rents. Residential rents have generally been less volatile as the leasing market is driven  by end-users. In fact, Colliers sees a downturn in the global economy as the largest threat for the Hong Kong residential market. Residential prices are likely to fall during an economic downturn, as owners become more open to negotiation and buyers skew conservative.

    “While we expect residential prices to recover moderately in H2 to record a full-year drop of 3.8% in 2019 in even the most optimistic scenario, the leasing market should stay firmer as rental growth has been less volatile than price growth given continually firm tenant demand. By mid-2019, investors should be looking at the residential market again, as the impacts of rising interest rates and trade disputes should be more apparent,” said Daniel Shih, Senior Director of Research at Colliers International Hong Kong.

     

    Luxury Residential at the Lowest Risk while Leasing Demand Should Stay Firm

    “We expect residential rents in traditional luxury markets should stay relatively firm in the event of a downturn, as landlords did not aggressively increase rents during the last upcycle from Q3 2014 to Q2 2018,” said Letizia Garcia Casalino, Head of Residential Services at Colliers International Hong Kong.

    Colliers recommends tenants to take the opportunity to search for more affordable options in other areas as the expansion of the MTR network has opened up more districts and new office supply in Kowloon East is scheduled to outstrip that of Hong Kong Island.

    As companies relocate across the harbour, Colliers recommends expatriates consider options in Kowloon and the New Territories to benefit from the proximity to their new workplace; for families, Kowloon East and Sai Kung District in particular now provide a number of new school campuses. Colliers also expects tenants renewing their contracts to have stronger rental bargaining power, given the increasing supply of leasing properties amid a softening market.

     

    Fewer Owner-Occupiers Shows Shift from Buying to Leasing in Private Housing

    “We expect residential rents in traditional luxury markets should stay relatively firm in the event of a downturn, as landlords did not aggressively increase rents during the last upcycle from Q3 2014 to Q2 2018,” said Letizia Garcia Casalino, Head of Residential Services at Colliers International Hong Kong.

    Colliers recommends tenants to take the opportunity to search for more affordable options in other areas as the expansion of the MTR network has opened up more districts and new office supply in Kowloon East is scheduled to outstrip that of Hong Kong Island.

    As companies relocate across the harbour, Colliers recommends expatriates consider options in Kowloon and the New Territories to benefit from the proximity to their new workplace; for families, Kowloon East and Sai Kung District in particular now provide a number of new school campuses. Colliers also expects tenants renewing their contracts to have stronger rental bargaining power, given the increasing supply of leasing properties amid a softening market.

     

    Fewer Owner-Occupiers Shows Shift from Buying to Leasing in Private Housing

    Colliers observes that the leasing market has traditionally experienced a smaller impact from stock market shocks, as leasing demand strengthened when residential prices became unaffordable. According to the Census and Statistics Department, owner-occupiers have been declining as a proportion of the total number of domestic households in private sector housing. Given that the aggregate demand for residential units is unchanged, Colliers sees more home users shifting from buying to leasing.

     

    For the latest news from Colliers, visit the official website.

     

     

     

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