Hong Kong’s luxury residential segment showing the biggest, quickest rebound

PETALING JAYA: The residential sector is leading the recovery of Hong Kong’s real estate market, with the luxury residential segment showing the biggest and quickest rebound.

Ricky Poon, executive director, residential sales, Colliers International said: “Sales transactions with lump sum prices of HK$100 million (RM44.76 million) or above saw 80% quarter-on quarter (q-o-q) growth during 3Q2009. Average luxury residential prices also increased 9.6% q-o-q to HK$14,200 per sq ft (psf) as of August 2009.”

Mid-tier units, ranging from HK$20 million to HK$50 million, are the most favoured properties. Limited stock of top-tier units in the price range of HK$50 million in the traditional luxury residential areas such as the Peak and the South Side has pushed up the prices significantly in the face of strong demand.

Overall, the residential sector has seen a price increase of 25% since March 2009 and rising rentals were recorded in 3Q2009. Prices for luxury residential units now stand at just 5% below the peak, registered before the financial crisis in September 2008. Colliers anticipate the market will set new peaks again in the next 12 months.

At a press briefing held on Sept 28 in Hong Kong, Richard Kirke, managing director, Colliers International Hong Kong said the Hong Kong residential property market is recovering at a much quicker pace than many other countries in the region. As confidence in a global economic recovery grows, many large occupiers of space have started planning for an increase in head count in 2010 and beyond.

In the office sector, the pace of decline in rentals has slowed to 1.3% q-o-q in 3Q2009 from 12.1% q-o-q in 2Q2009. Grade A office average effective rentals posted a marginal rise towards the end of 3Q. Colliers forecast a rise of 5% or above in the next 12 months, though the prospect for growth is mixed amongst various sub-markets.

According to Iain Chapman, director, commercial-tenant representation, Colliers International, Central and Admiralty is expected to generate higher demand for space than other areas. “The vacancy rate in this sub-market remains very low at 5.6%. Also, there are signs that individual hedge funds are returning to the market, which demands premium office space in the district,” he added.

Another sub-market expected to register strong growth is Kowloon East, due to lower rents compared with other sub-markets in Hong Kong and its popularity with insurance, distribution and consumer products industries.

The industrial sector posted a mild decline of 0.5% q-o-q in 3Q2009 as the bulk of industrialists continued to put a hold on their expansion. In the retail sector, the volume of sales transactions has increased with retail shops in the region of HK$30 million to HK$50 million being the most popular. The food and beverage sector was the key driver in 3Q2009 on the leasing front. International retailers are expected to become active after 1Q2010.