Four key property sectors in HK enter recovery stage

PETALING JAYA: Four key property sectors in Hong Kong – office, residential, industrial and retail property markets – have entered a recovery stage since 4Q2009, leading by this year’s sales market, managing director of Colliers International Hong Kong Richard Kirke said.

In statement on Dec 10, he added that the luxury residential sales sector, in particular, registering a significant price growth of 40% year-on-year (y-o-y), is outperforming in the local market, with a strong increase in the number of buyers coming from Mainland China.

“As inflow of liquidity is expected to be sustained, property prices will continue to see an upward growth while the leasing market will pick up its recovery momentum in 2010,” he said.

From January to November 2009, there were 304 property investment transactions (with lump-sum prices over HK$30 million or RM13.2 million). It was an increase of 14.7% y-o-y, while the total transaction value slightly decreased 2% y-o-y to HK$37.16 billion.

This scenario represented less expensive property prices but a stronger investment activity in 2009. Meanwhile, the total transaction value invested in retail investment properties was the highest amongst other types of properties, recording HK$11.48 billion.

Antonio Wu, its regional director of Asia Investment Sales, said investors will continuously be interested in investing in physical real estate assets in anticipation of low interest rates and possible inflation next year.

“Local investors will remain the main driver, while foreign institutional investors will return in 2H2010 when they see a more stabilised leasing market and improvement on yields. Some of the China investors, who have growing interests in Hong Kong’s property, are expected to switch their focus to the office sector after seeing a dramatic growth in luxury residential prices in the past year,” he added.

The Grade A office leasing market, meanwhile, is experiencing a mild pick-up after its continuous fall in the first three quarters of 2009. In 4Q, the rentals edged up slightly by 3% quarter-on-quarter (q-o-q).

“In Central, there are more medium-sized financial firms, but non-finance tenants prefer cost-saving options such as decentralisation. Meanwhile, offices in Kowloon East remain the cost effective options for a range of companies. For example, some insurance companies have moved their offices from the Hong Kong Island to Kowloon East,” said Fiona Ngan, director of Kowloon Commercial.

Simon Lo, director of research & advisory expected Grade A office rentals to rise 8% in the next 12 months, while rental movement will vary across different districts.

“Central and Admiralty will see relatively higher rental rises because of its limited stock and greater occupational demands. In East Kowloon, office rentals are also expected to rise at a higher percentage due to decentralisation and its suppressed rental level in 2009. However, the rentals in Wanchai, Causeway Bay, North Point and Quarry Bay will see downward pressure, suffering from the relocation of non-finance companies,” he added.

He also expected industrial prices and rentals to see positive growth in 10% and 5% respectively, in anticipation of a pick-up in re-exports in 2H2010.

Colliers International said the external trade volume in 2009 continued to contract, causing downward pressure on the demand for logistics warehouses. It resulted in a fall of 10% year-to-date (YTD) in industrial rentals. Meanwhile, industrial prices were driven up by 20% YTD as more occupiers decided to buy their leased properties.

In the retail market, the prevailing positive market sentiment has yet to be fully translated into sales volume. Retailers remained conservative in their real estate plans, which resulted in a 10% YTD fall of retail property rentals.

However, the retail property sector is expected to see more positive signs with rising enquiry by retailers and strengthening market confidence.

“More leasing commitments are expected after the Chinese New Year in 2010. Local retailers, in particular, will re-focus on premises in core locations. By sector, food and beverage will see further expansion,” Simon said.

According to Colliers’ research, the rentals of prime ground-floor shops in the four traditional locations (Central, Causeway Bay, Tsim Sha Tsui and Mong Kok) are projected to grow 6% in the next 12 months with the yields staying flat.