• Savills looks forward to 2017

    12 December 2016

    Luxury Residential Rents and Prices – “Local Drivers”


    We have noted an increase in local participation in the leasing market from June this year. We think this is due to more ‘purchasers-in-waiting’ faced with limited available stock and prices above their affordability threshold. There are few townhouses on the market as landlords are tending to renew leases at reasonable rates while expat demand for such properties is muted. On another note, new schools in the New Territories / Kowloon, principally Homantin and Tai Po, may begin to drive leasing demand in the area next year.

    Hong Kong residential rental forecasts, 2017F

    Luxury Apartments +5%
    Townhouses 0 to +5%


    In the sales market next year limited new supply, negative real interest rates and strong local affordability among UHNWI’s should prevent price declines and act as a counter weight to government policy measures. The luxury sector should be better insulated than the mass market.

    Hong Kong residential price forecasts, 2017F

    Luxury Apartments 0 to +5%
    Townhouses +5%

    Grade A Office Rents and Prices – “A Lack of Suitable Stock”

    Vacancy rates in the sector remain at historically low levels while PRC demand remains a force in the market. Despite the supply spike next year, not all is suitable for ‘typical’ tenants who may be wary of large floorplates smaller landlords or the risk of sale (either en-bloc or strata-title). More recently Wong Chuk Hang has emerged as the first choice of back office location with competitive rents and the MTR scheduled to begin operations on December 28th.

    South Island Line

    Hong Kong office rental forecasts, 2017F

    Central Grade A Offices +5% to +10%
    Overall Grade A Offices 0%


    New measures in the residential market and a cloudy outlook for the retail sector is prompting some investors to turn back to offices where competitive mortgage deals and the prospect of rental growth in core areas is helping drive demand. End-user activity is absorbing new supply and generally limited availability is offering strong support to prices.

    Hong Kong office price forecasts, 2017F

    Central Grade A Offices +5% to +10%
    Overall Grade A Offices 0%


    Prime Street Shops and Malls – “Memories of 1998”

    The rapid decline of the sector has been well documented and some luxury retailers are already drawing parallels with the Asian Financial Crisis of 1998. Street shop rents have been quick to adjust while shopping malls, previously insulated from the downturn, are now following suit. Further falls in rents are expected next year but at a more moderate rate. Luxury retailers will continue to rationalise their store networks while landlords target fast fashion, cosmetics and F&B. New Territories malls are holding up well reflecting reasonably bright prospects for local consumer spending in 2017.

    Hong Kong retail rental forecasts, 2017F

    Prime Street Shops -5% to -10%
    Shopping Malls 0% to -5%

    Prime retail landlords are unlikely to become forced sellers and would generally prefer to adjust rents than discount prices. Secondary and tertiary locations where more vacancy is becoming apparent may see more transactions next year.

    Hong Kong retail price forecasts, 2017F

    Prime Street Shops -10% to -15%

    Hong Kong property market rental forecasts, 2015 forecast vs 2016 actual

    • Office rental growth was a bit stronger than anticipated
    • Retail rents fell faster than expected
    • Luxury apartment and townhouse rents did not fall as much as expected


    2016F as at 2015 2016E
    Central Grade A Offices +5% to +10% +11%
    Overall Grade A Offices +5% +4%
    Prime Street Shops -10 to -15% -17%
    Shopping Malls 0 to +5% +3%
    Luxury Apartments -5 to -10% -1%
    Townhouses -5 to -10% -2%
    Flatted factories +2.5% -4%
    Warehouse 0% -1%

    Hong Kong property market price forecasts, 2015 forecast vs 2016 actual

    • Central office prices had a surprisingly strong year
    • Prime street shop prices fell more sharply than forecast
    • The industrial market reported a more muted year


    2016F as at 2015 2016E
    Central Grade A Offices 0 to +5% +7%
    Overall Grade A Offices 0 to +5% +2%
    Prime Street Shops -5% to 0% -15%
    Luxury Apartments 0 to +5% +2%
    Townhouses 0% +1%
    Flatted factories +5% +1%
    Warehouse +5% -1%

    Photo caption: (From left to right) Charles Chan, Managing Director of Valuation and Professional Services; Patrick Chau, Senior Director of Residential Development and Investment; Peter Yuen, Head of Sales and Investment; Nick Bradstreet, Head of Leasing; Edina Wong, Head of Residential Leasing; James Siu, Head of Kowloon; Keith Chang, Managing Director of Savills Realty and Elizabeth Henderson, Head of PR and Marketing, APAC; (Back row, from left to right) Simon Smith, Head of Research and Consultancy; Thomas McAlister, Head of International Residential


    Natural and Organic: Red Dunes Playtopia Video credit: CHENIN Studio

    World Architecture Festival 2022 took place in Lisbon, the 2023 edition will be held from 29 Nov - 1 Dec at Singapore.


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