HONG KONG, CHINA, September 12, 2017: Cushman & Wakefield, a global leader in commercial real estate services, revealed that the growth in home prices showed no signs of abating as demand remained strong. However transaction volumes were down, suggesting slow sales in the secondary market and buyers looking on as the price level trended further upward. The sentiment in the property investment market was hot, with investors eyeing en-bloc office properties with vertical retail elements.
After a robust Q2, home sales slowed as Sales and Purchase Agreements (primary and secondary residential combined) dropped by nearly half from the June level to 3,515 in July, and to 4,014 in August. The summer months recorded the lowest sales since January, and the first time this year with decreased YoY sales. The continuous growth in prices were likely one reason for this: Price indices for selected popular developments rose by 9% year-to-date (YTD), and representative estates such as City One Shatin, Taikoo Shing and Residence Bel-Air recorded even greater growth of 12% to 17% respectively during the same period.
Mr Alva To, Cushman & Wakefield's Vice President, Greater China & Head of Consulting, Greater China commented, "Recently the government has revised the GDP growth forecast for 2017 upwards to 3-4%, after the local economy's expanded by 4% year-on-year in real terms in the first half of this year. The upward revision clearly signaled the optimism over the prospects of the local economy, which underpins home purchasing power. The unemployment rate dipped to 3.1% from 3.4% in the same period last year, which together with the lack of major movement in the interest rate, are stimulants of home purchases. These would lend support for another 5% growth in home prices through year end."
Mr To added, "This year, the launch of new projects was the main reason for the increase in home sales in a month, as the proportion of primary sales in total residential sales went from 20% in early 2016 to well over 30%, and even approaching 40% in recent months. Compared with past decades where the proportion of secondary sales were usually over 80%, the recent fall in secondary sales reflected an unbalanced distribution of demand, which is a concern with respect to the sustainable development of the Hong Kong housing market."
In the property investment market, 56 major transactions (each with a unit value of more than HK$100 million) were recorded in Q3 thus far. The total consideration of these deals, at HK$21.9 billion, indicated a significant growth in deal size compared with Q2. Notable transactions in the office sector have become the highlight of the summer investment market, which have led the other sectors by the most number of major deals and the amount of considerations.
Encouraged by the record-breaking land sales in Q2, investors remained strongly interested in office properties in Q3, where the available stock is scant. Nevertheless, the sale of Cubus, an en-bloc office in Causeway Bay, became the largest deal in the quarter netting approximately HK$2 billion, while the sale of L'Hart, another en-bloc office in the same district, was another signature deal of the quarter. Both buildings are termed "vertical retail" properties.
Mr Tom Ko, Cushman & Wakefield's Executive Director, Investment & Advisory Services in Hong Kong, commented, "Although retail rents have yet to turn around, there are improvements in the retail market indicators such as a rebound in sales of luxury goods and growth in tourist arrivals. Investors have been quick to seize vertical retail properties which are largely supported by local spending demand. We expect that when retail rents start to grow, there will be more transactions of individual shop fronts."
"The market will see more major transactions in Q4 as some trophy deals are in the pipeline. However, as the gap between the expectation of owners and buyers grows, the number of deals in Q4 could be limited by the amount of available stock in the market, but deal size is likely to increase further especially when trophy properties are involved," concluded Mr Ko.