Global crisis + low season = floundering property market

The January numbers for Hong Kong’s property market sectors mostly make for disheartening reading.

Residential sales again plummeted, this time to 18% month-on-month to 3,507 units this January, the lowest figure since November 2008. Sales of luxury homes valued over HK$10 million fell 17% to 385, said Knight Frank LLP, the British global residential and commercial property consultant.

More flats were released for rent in the leasing market last month. Take-up, however, proved tepid during the traditional low season with the result that luxury rents fell further to 1.3% month-on- month.

Grade A office rents continued their downward spiral, with the average rent dropping 1% in January. Central recorded the biggest correction of 1.9%, followed by Mong Kok/Yau Ma Tei, where rents decreased 1.5%.

While office and residential markets recorded low turnovers, the retail leasing sector continued to outperform as international brands entering and expanding in Hong Kong competed for prime spaces.

Hung Hom and Kowloon East saw rents grow 3.2% and 1.2% respectively last month.

Grade A office rents in the CBD are likely to see a 10 to 15% correction in the first half of the year. Asking rents in non-core areas are likely to remain firm, with landlords enjoying low vacancies amid strong relocation demand.

Strong retail sales growth continued in January with a number of shopping centres and high end retailers reporting double digit sales growth during the Chinese New Year period. Many retailers, especially mid-market operators who cannot afford sky high rents in prime locations, are expected to move to non-core areas or up to higher floors.

Knight Frank expects rents in non-core areas to rise by a moderate 5% this year.

Knight Frank believes residential sales volume will rebound in February since there have been no announcements confirming further regulatory measures in the 2012/2013 government budget.

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Tags: Knight Frank LLP, Hong Kong property market