Value of shop deals up 17%

HONG KONG: Demand for shops has been strong this year, with buying interest bolstered by strong retail sales and an improving economy.

The value of deals for shops so far in the first quarter was up 17%, to HK$1.6 billion (RM622.81 million) as of Monday, Mar 7, compared with a year earlier, according to data from property consultancy DTZ, and the strong growth trend is likely to continue for the rest of the year.

Among the major transactions was the purchase of a shope in Causeway Bay for HK$633,333 per square foot — a record for the sector.

"Because of strong growth in consumption and tourist spending, it is expected that transactions of retail and other commercial properties will increase more readily after the first quarter," said Alvin Yip, DTZ co-head of investment for China.

Deals worth HK$16.3 billion were done for shops last year, an increase of 43.8% over the total value of shops sold in 2009. By comparison, in the residential sector, DTZ said, sales volumes initially dropped after the government's austerity measures announced in November but had picked up in January and February.

It estimates 35,764 sale and purchase agreements will be struck in the first quarter, which would be the third-highest first-quarter total since 1998, after previous highs achieved in 2008 and last year.

In addition to rising deal numbers, home prices had also climbed significantly in the last two months, DTZ said.

The average price of a unit in Taikoo Shing rose 8% month on month in February to HK$9,500 per sq ft, an increase that matched the wider market price growth in the mass residential sector.

Looking ahead, continued strong economic growth, falling unemployment and limited supply would support the housing market, said Alva To, head of consulting for Greater China at DTZ.

Clouding this outlook, he warned, was uncertainty over the outlook for interest rates.

"Abnormally low interest rates that ease the burden of mortgage payments has been one factor behind the boom in the local residential market. However, the prospect of interest rate increases in the US and Europe has been highlighted recently by the Hong Kong Monetary Authority," To said. "This is a reminder that market sentiment may depend on changes in interest rates. The movement of interest rates is the biggest concern for the residential market in the near future." — SCMP