Knight Frank reports that residential property sales have eased significantly in Hong Kong as cooling measures keep things icy between buyers and sellers. Transactions in the secondary home market dropped 14.5% in August from the previous month, putting the number of sales at its lowest since the start of the year. The report determined that the market will only make a comeback if and when sellers are willing to cut prices. Developers, however, have already gotten onboard and have created many deals to lure cautious buyers. For more on this continue reading the following article from Property Wire.
The local secondary home market in Hong Kong became even more sluggish in August, with the total number of transactions dropping a further 14.5%, month on month.
It means that the number of sales fell to 3,407, the lowest figure since January 2013, according to the data in the latest monthly report from Knight Frank.
It reveals that few deals were recorded in major residential estates last month and the secondary home market is expected to remain inactive in coming months as new mass market projects continue to attract buyers.
‘Transaction volume will only rebound when home owners become willing to cut prices sharply,’ the September monthly report says.
The report also shows that the primary sector showed signs of revival, with more mass market projects becoming available for sale or in the pipeline. In particular, The Rise in Tsuen Wan, developed by Cheung Kong (Holdings) managed to sell around 200 units on the first day of launch, the strongest response recorded since the Residential Properties (First-hand Sales) Ordinance took effect on 29 April.
Meanwhile, the New World Development also sold about 82% of the 238 flats on offer at Park Signature in Yuen Long on the first day of launch.
It points out that developers have redefined their sales strategies, postponing project launches as market sentiment deteriorated after stricter sales rules came into practice and more property measures were implemented by the government.
As buyers became more cautious, developers cut prices and offered attractive financial terms to make their new projects more financially appealing. ‘We expect developers to pitch new releases at a smaller premium over prices in the secondary market. Some areas, such as Tseung Kwan O and Yuen Long, will see ample new supply and prices will be under pressure in the coming months,’ says the report.
On the leasing front, there was a shift in demand from super luxury to mid-range luxury units, probably due to the lowering of accommodation allowances for staff in the finance sector and greater cost awareness among tenants, of them many were shifting to personal leases. Although landlords of luxury properties remained negotiable, the leasing market was less active, despite it being the traditional peak summer season. Luxury residential rents dropped 2.7% in August, the biggest dip since August 2009.
‘With various cooling policies in place and market sentiment remaining cautious, we believe there will be a drop in activity in both the primary and secondary markets over the year. In 2013, the total number of residential sales is expected to fall about 20% to fewer than 70,000, with mass residential prices dropping less than 5% and prices in the more resilient luxury sector falling less than 3% in the rest of the year,’ the report explains.
Meanwhile, sentiment in the Grade A office sales market remained cautious in August. However, despite limited transactions, a result of the sustained effect of the government’s various stamp duties, prices stood firm, the report also shows. One major sales transaction last month involved 9,420 square feet of space and some car parking spaces in Enterprise Square Two in Kowloon Bay sold for HK$7,696 per square foot.
‘The Grade A office leasing sector witnessed stable activity, especially towards the end of the month as the summer holidays ended. A number of firms from the financial, advertising, media and IT industries, requiring small to medium sized office space, underwent expansion,’ the report says.
For example, Dutch asset management firm Robeco expanded in Man Yee building in Central, taking a 5,935 square foot space, while Japanese media firm Nikkei increased its office size at 28 Hennessy Road in Wan Chai, leasing a 4,935 square foot unit.
The recent, brisk relocation activity driven by the redevelopment of Somerset House in Quarry Bay and Sunning Plaza in Causeway Bay slowed considerably, as most tenants had settled in new locations.
Both districts remained relatively active, with a number of transactions reported. Networking website LinkedIn relocated from a business center in Causeway Bay to a 16,481 square foot floor in Hysan Place in the same district, while American marketing and communications firm Young & Rubicam took a 10,743 square foot floor in Oxford House in Quarry Bay.
The report also shows that Kowloon witnessed a growing trend in tenants choosing to renew existing contracts rather than relocate, as office supply remained tight. The narrowing gap in rents between core and non-core areas also discouraged relocation to non-core districts.
In Central, an annual average of only 100,000 square foot of new Grade A offices will be completed in 2013 and 2014. Limited supply and stable demand will keep rents stable. Some buildings are actually seeing rental growth and the report says that rents of premium buildings have risen 4.8% from a year ago.
‘Meanwhile, Grade A office prices in Hong Kong will remain stable as long as the government continues to implement cooling measures,’ it concludes.
This article was republished with permission from Property Wire.