RICS: Sales Transaction Levels Remain Low in Hong Kong, with Luxury Property Market in Particular Struggling

RICS Global Commercial Property Survey Q1 2009

HONG KONG, May 29 /PRNewswire-Asia/ -- Occupier demand continued to shrink as the global economic slowdown hit the local market. Nevertheless the sales market in Q1 2009 recovered, mainly driven by end user demand for prime assets at discounted prices, forcing yields down from their recent highs in Q4 2008.

Looking ahead, while landlords may be forced to offer more incentives to retain existing tenants, as corporate budgets remain tight, the search for prime properties by cash rich investors may slow alongside shrinking occupier demand and a drifting economy. Both are expected to hurt investment sentiment in the medium term.

Rents are falling across more than 90% of the countries surveyed with only Brazil, Saudi Arabia and parts of Africa, yet to report declines. Surveyors are unanimous that rents are falling in Singapore and Ukraine, while in Russia 97 percent of surveyors reported a fall rather than rise in rents.

Weaker tenant demand has led to faster rises in reported available space which has compounded the gloom towards the rental outlook. Rental expectations are weakest in Singapore, Hong Kong and Ireland with sentiment in countries in emerging Europe also gloomy - particularly Hungary, Romania and Ukraine. Available space has risen across every region forcing agents to offer increasingly larger incentive packages in order to secure a letting.

Despite the rental gloom the rapid re-pricing in some markets may be encouraging investor interest. Across the developed regions leading the property cycle, investment demand and lettings demand fell at a slower pace. Indeed, purchasing activity is expected to rise across Western Europe and Asia for the first time in over a year.

"Trading activities have nearly stopped for the period under review and the situation is even worse for the luxury property market," said Mr. Albert So, Chairman of RICS Hong Kong, "but we are expecting the market to go up again by the fourth quarter of 2009."

Looking at Shanghai, surveyors reported that investment activities are almost stopped for the time being. Last December has been the worst month since the beginning of 2007. From the beginning of 2009 until now, many bright sides have been reviewed for the PRC property market. Surveyors are confidence that the effects of economic recession will be less and less in the coming months. But it takes time for institutions to react and adjust their strategies, especially in the commercial property sector.

On the other hand, the commercial property market in Beijing is facing upwards supply with a downturn in demand, especially for the office sector. Rental and occupancy rates have dropped in the past three months. Relocation of some MNCs from Grade A office to Grade B office witnessed due to tight leasing budget. Investors taking wait and see attitude towards property market, enquiry for investment opportunity increases, especially for premium office and retail property.

About the Global Property Commercial Survey

RICS' Global Commercial Property Survey is a quarterly guide to the developing trends in the commercial property investment and occupier market. This edition details market conditions for the fourth quarter of 2008 based on information collected from leading international real estate organisations and local firms.

Survey questionnaires were sent to real estate organisations in December 2008, with responses received up until 14th February 2009. Respondents were asked to compare conditions over the latest three months with the previous three months. A total of 427 responses were received.

Responses have been amalgamated across the three real estate sub-sectors of offices, retail and industrial property at a city level, to form diffusion indices for the commercial market as a whole. The eight world regional groupings have been derived through the weighting of city level diffusion data using city population and country gross domestic product statistics.

About RICS & RICS Asia

RICS (Royal Institution of Chartered Surveyors) is an independent professional body originally established in the UK by Royal Charter. Since 1868, RICS has been committed to setting and upholding the highest standards of excellence and integrity -- providing impartial, authoritative advice on key issues affecting businesses and society.

RICS is the worlds' leading qualification when it comes to professional standards in land, property and construction. With over 140,000 members globally, RICS represents, regulates and promotes the work of property professionals throughout 146 countries.

The RICS Asia supports a network of over 9,000 individual professionals across the Asia region with an objective to help develop the property and construction markets in these countries, by introducing professional standards, best practice and international experience. It promotes RICS and its members as the natural advisors on all property matters. It also ensures that services and career development opportunities are provided to members.

The RICS Asia region covers national associations and local groups locating in Brunei, Malaysia, Singapore, Thailand, The People's Republic of China and the SAR Hong Kong. It also has members working across the region such as Bangladesh, Bhutan, Burma/Myanmar, Cambodia, Indonesia, Japan, Kiribati, Laos PDR, Macao, Mongolia, Nepal, North Korea, South Korea, Taiwan, The Maldives, The Philippines, Timor East and Vietnam.

Media enquiry, please contact:

RICS Asia Pacific Public Relations Representative

Ms Katherine Chow / Ms Kate Kwan

Tel: +852-2372-0090

Fax: +852-2372-0490

Mobile: +852-9256-3223 / +852-9077-1337

Email: kat@creativegp.com / kate@creativegp.com