Investment Transactions & Volume Slumped by Tightening Policies, but Prices Prove Resilient

HONG KONG, Oct. 30, 2013 /PRNewswire/ --

• In Q3 2013, the total investment volume dropped by 68% quarter-on-quarter (q-o-q) and 76% year-on-year (y-o-y).
• The number of residential transactions dropped by 3.2% q-o-q; the number of units sold dipped below 3,000 units in both August and September.
• High liquidity and low interest rate scenario will persist in the near-term, preventing a large fallout in prices.

Cushman & Wakefield, the world's largest privately owned real estate services firm, today released the third quarter of 2013 trends for the Hong Kong investment and residential markets and the outlook for the fourth quarter.

No. of transactions will remain low with few large deals in Q4; strata properties will see more accelerated price declines than en bloc properties

The impact of cooling measures continued to derail investment activity in the third quarter. The total overall investment volume dropped by 68% q-o-q and 76% y-o-y, in which only the industrial sector recorded an increase in the number of major transactions above HK$100 million. The office and retail sectors saw investment volume continue to realize sharp declines. Prices, on the other hand, stayed more resilient due to the favorable high liquidity and low interest rate environment which has caused most sellers to be reluctant to drop prices significantly. Office and retail capital values dropped by 1% or less quarter-on-quarter, while industrial capital values regained some momentum and increased by 1.5% quarter-on-quarter.

Kent Fong, Executive Director, Investment -- Hong Kong, said, "The ripe investor environment of high liquidity and low interest rates is intact. Some investors will continue to seek attractive opportunities in the market, notably en bloc properties but the supply is limited. Strata-title properties are quickly losing their lure and prices of these properties are likely to see a correction in the short-term. Therefore, we foresee that transaction volume will remain low for the rest of the year. Prices will drop around 5% across most sectors over the coming several months."

More new primary project launches in Q4 and unit prices are anticipated closer to the secondary market

The overall number of residential transactions dropped by 3.2% quarter-on-quarter (q-o-q), where transactions over HK$10 million dropped by 17% q-o-q during the third quarter. The transactions in the new primary launches have offset the significant drop in the luxury sector. With more units release in the primary market, it has also shifted some buyers from the secondary market.  Luxury property investors have been pushed to the sidelines due to the current polices and the gap between buyers and sellers stayed wide. Buyers are waiting for the prices to decline and lack of the sense of urgency while the owners' holding power remains strong. Vincent Cheung, National Director, Valuation & Advisory -- Greater China, said, "The government remains committed to increase mass residential supply. With a strong demand on small to medium-sized flats, the focus of new supply will be on flats below 1,000 square feet. We anticipated that more small to medium-sized developers will participate in land auctions for constructing units around 1,000 square feet. However, development costs like construction and labour are increasing due to inflation, and therefore developers will be more cautious on tender prices."