A loosening regulatory environment combined with low interest rates is helping Hong Kong’s property market to stabilize, according to a report from Knight Frank. Land Registry numbers show marked improvement in sales for primary and secondary markets in February. Transaction volume among rentals remained low, however, as landlords lowered lease prices in an attempt to attract renters, particularly in the luxury market. Even so, experts say there is still a great deal of uncertainty in Hong Kong due to the persistence of the European debt crisis and higher oil prices stemming from volatility in the Middle East. For more on this continue reading the following article from Property Wire.
The residential market property market in Hong Kong saw a notable rebound in sales volume with prices stabilising last month, according to the March 2012 market review from Knight Frank.
Other positive factors included the absence of further regulatory measures in the 2012/2013 Budget and a low interest rate environment, the report says.
According to the Land Registry, the number of home sales grew 10.7% month on month to 3,884 in February, the first rise since November 2011. However, sales of luxury homes valued over HK$10 million decreased a further 23.6% to total 294.
Sales in the secondary market revived in February, with some transactions reportedly having closed at record breaking prices. The average luxury home price grew 0.6% in February, led by growths of 3.6% in Pokfulam and 0.6% in Mid-Levels.
The primary sales market continued to receive a good response. A number of new developments were launched and recorded encouraging sales results.
On the leasing front, transaction volume remained low. The absorption of luxury flats for rent remained weak following waves of layoffs in a number of financial institutions, the report says. Some landlords were eager to lower asking rents to secure tenants and luxury rents decreased 1.3% month on month.
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‘Looking ahead, uncertainty in the property market is likely to remain given the slow progress in solving the European sovereign debt crisis, despite the injection of liquidity from central banks worldwide. Meanwhile, high oil prices resulting from unrest in the Middle East will threaten the global economic recovery,’ the report says.
‘In light of these issues, residential sales may dip again in the coming months, while the rental market will remain lukewarm. We believe both luxury prices and rents are likely to fall during the year,’ it adds.
The office market stayed relatively quiet with uncertainty in the global economy remaining. With many firms facing static budgets, demand for office space, particularly in Central, continued to shrink. Companies, particularly those from the financial sector, scaled back their operations, leading to a rise in surrender cases, the report reveals.
‘With major landlords becoming more flexible during lease negotiations, office rents dropped a further 2.1% in February month on month, following the 1% fall in January. Central led the rental decline with an overall drop of 4% and rents in its premium buildings falling 4.4%. Admiralty also saw rents decline 2.4% in the month.
Kowloon East, meanwhile, continued to outperform, as most quality office spaces were absorbed amid fierce competition among tenants looking for more affordable options.
Availability was particularly tight in Grade A buildings near MTR stations, bringing down the overall vacancy rate in this area to less than 9%.
‘Looking forward, companies are likely to become more cost sensitive and the number of tenants surrendering existing leases is expected to rise. Landlords are therefore likely to exhibit even greater flexibility in the short term,’ says the report.
‘We expect Grade A office rents in Central to drop 10 to 15% in the first half of 2012. Office rents in core business districts will remain relatively soft until the global economy shows signs of emerging out of recession,’ it adds.
This article was republished with permission from Property Wire.