HONG KONG, May 29, 2013 /PRNewswire/ -- According to Cushman & Wakefield's latest research report, Investment MarketBeat, total investment volume in Hong Kong decreased by 34.2% q-o-q after a round of tightening policies were implemented in February to reign in the non-residential market.
Coming off of a strong fourth quarter in 2012, the non-residential investment market remained highly active in early 2013 up until the implementation of tightening policies aimed at suppressing speculation and cooling the red hot market. Previously the market was buoyed by positive investor conditions including low borrowing rates and high liquidity which drove prices to new highs. In the office market, investment volume dropped sizably as tightening measures have nearly frozen the strata sales market. The shift in investor sentiment and higher transaction costs has caused some sellers to slash asking prices by more than 10% in only a month's time to facilitate a transaction. Kent Fong, Co-Head of Investment of Cushman & Wakefield Hong Kong said, "on a higher note the en bloc office market has remained active with occupiers seeking out premises for self-use as occupancy costs continue to rise and supply remains limited." Capital values slightly increased in Q1 2013 with strong gains through February offsetting the slight drop in March.
A similar story unraveled in other non-residential sectors such as retail and industrial, with the latter still showing resilience to the shifting market. While the number of industrial transactions has also fallen sharply, the volume of larger deals, those above HK$100 million, increased by 65% q-o-q. Opportunities for revitalization and redevelopment are still attracting investors and these longer-term investments are accounting for a growing proportion of investment volume. In the retail sector, prior to the new policies, Ginza-style projects and shopping center units were garnering significant interest among investors, some of which had shifted from the residential market. Several projects quickly sold out and generated healthy profits, however post-February, market activity quickly slumped and developers have shifted away from a strata sales strategy.
The residential market has also been impacted by added tightening measures aimed at removing investors and making purchases preferential to first-time buyers and end-users. The mass residential market is capturing most of the demand due to measures like the Buyer's Stamp Duty (BSD). In March, the number of transactions fell by 28% m-o-m as buyers took a wait-and-see attitude. Units priced above HK$20 million are capturing much lower interest among buyers due to increased SSD and BSD, while units priced between HK$10 million and $20 million are still capturing demand from end users for upgrading but at a slower pace. The market is still adjusting to the new policies and developers have provided greater incentives to lure buyers while owners have had to cut prices slightly to execute sales. Luxury residential prices still increased by an average of 1% q-o-q, but will come under some slight pressure due to the policy situation.
During the remainder of the year, the market will be buoyed by positive investor conditions apart from the measures and the economy will gradually improve. The market will see prices moderate slightly by 5% to 10% across most sectors with a greater correction expected among properties which have seen record price growth and been heavily targeted by speculators.
| HONG KONG SIGNIFICANT Q1 2013 SALES TRANSACTIONS | |||||
| PROPERTY NAME | PROPERTY TYPE | DISTRICT/ SUBMARKET |
AREA/GFA |
consideration / purchase price | UNIT PRICE |
| SF | HK$ Million | HK$/SF | |||
| Manulife Tower, One Bay East West Tower | Office | Kowloon East | 512,000 | 4,500 | 8,789 |
| 113 Argyle Street | Office | Kowloon West | 340,000 | 2,900 | 8,824 |
| Ovest | Office | Greater Central | 48,000 | 640 | 13,333 |
| Manley Comm Bldg | Office | Greater Central | 58,270 | 615 | 10,555 |
| G-1/F 58-60 Sai Yeung Choi Street South | Retail | Kowloon West | 3,000 | 567 | 189,000 |
| Mody House | Retail | Kowloon West | 14,061 | 349 | 24,820 |
| Success Centre | Industrial | Kowloon West | 230,000 | 700 | 3,043 |
| Hing Wai Ice and Cold Storage Building | Industrial | Island South | 200,080 | 603 | 3,014 |
Source: EPRC, Cushman & Wakefield
About Cushman & Wakefield
Cushman & Wakefield is the world's largest privately-held commercial real estate services firm. The company advises and represents clients on all aspects of property occupancy and investment, and has established a preeminent position in the world's major markets, as evidenced by its frequent involvement in many of the most significant property leases, sales and assignments. Founded in 1917, it has 253 offices in 60 countries and more than 15,000 employees. It offers a complete range of services for all property types, fully-integrated on a global basis, including leasing, sales and acquisitions, debt and equity financing, investment banking, corporate services, property management, facilities management, project management, consulting and appraisal. The firm has more than $4 billion in assets under management. A recognized leader in local and global real estate research, the firm publishes its market information and studies online at www.cushmanwakefield.com/knowledge. In Greater China, Cushman & Wakefield maintains seven market-leading offices in Beijing, Shanghai, Chengdu, Guangzhou, Shenzhen and Hong Kong. More information is available at www.cushmanwakefield.com.
