2024-10-22-莱坊-Hong_Kong_Monthly_September_2024_4页_245kb

Hong Kong Monthly Summary - September 2024

Core Content Overview

This report provides an analysis of the performance of Hong Kong's office, residential, and retail property markets in August 2024. It highlights the challenges faced by each sector, the current trends, and future expectations based on economic conditions and market dynamics.

Office Market Analysis

Market Uncertainty Dampens Leasing Momentum

• Overall Performance:

  • Office leasing activity remained weak due to weak market sentiment.
  • Grade A office rent on Hong Kong Island dropped to HK$62.6 per sq ft in August, a 6.5% YoY decline and 3% YTD drop.
  • The overall vacancy rate for Grade A offices remained high at 13.4%.

• Submarket Trends:

  • Central, Admiralty, and North Point saw more significant rental declines (-5.8%, -6.0%, and -9.7% YTD respectively).
  • Kowloon experienced a slowdown in leasing activity in August, with a 13% MoM decrease in new leasing transactions.
  • European companies delayed real estate decisions, contributing to the slowdown.
  • Average monthly rent in Kowloon dropped slightly to HK$22.8 per sq ft.

• New Demand:

  • New hedge funds are driving demand for smaller office spaces (below 5,000 sq ft).
  • A local hedge fund leased the entire 9th floor (5,700 sq ft) of LHT Tower.

• Tenant Behavior:

  • Tenants are taking advantage of falling rents to upgrade locations.
  • ICBC relocated from a 135,000 sq ft office in Kwun Tong to a 165,000 sq ft space in One Harbourfront, Hung Hom, which will add pressure on Kowloon East landlords.

• Market Outlook:

  • Office rents are expected to drop by 3-5% in Kowloon East and 1-3% overall in 2024 due to continued uncertainty and the ripple effect of ICBC's move.
  • The office leasing market is expected to remain downbeat in the near term.

Residential Market Analysis

Home Prices at an Eight-Year Low, Rental Market Shows Resilience

• Price Trends:

  • Home prices dropped by 1.9% MoM and 4.7% YTD in August, reaching an eight-year low.
  • A 25% decline from the historical peak in September 2021.
  • First-hand transactions surged by 40% MoM to 1,154 in August, driven by discounts and developer support.

• Luxury Market:

  • Luxury home demand remained steady.
  • Notable transaction: Mont Verra in Beacon Hill sold for HK$1,028 million (HK$90,318 per sq ft).

• Rental Market:

  • Overall rents increased by 1.1% MoM, reaching a record high since August 2019.
  • High demand from newly arrived talent and mainland students, especially for flats near universities with rents ranging from HK$7,000 to HK$8,000.
  • Postgraduate students prefer larger flats with rents over HK$20,000 per month.

• Market Outlook:

  • The US Fed's 0.5% interest rate cut in September has initiated a new rate-cut cycle.
  • High-interest rates continue to affect mortgage costs, leading to insufficient purchasing power.
  • With high inventory of primary stock, property prices are expected to remain under pressure in the near term.
  • Second-hand properties face challenges due to aggressive developer pricing.

Retail Market Analysis

Gloom Deepens as Sales Drop Further

• Overall Performance:

  • Retail sales value fell 11.8% YoY to HK$29.1 billion in July 2024, marking the fourth consecutive month of decline.
  • Tourism-oriented trades, such as clothing, footwear, and jewelry, saw double-digit sales declines.

• Leasing Challenges:

  • The retail leasing market faces difficulties in both core and livelihood areas.
  • Canton Road, a key shopping street, has seen a shift in tenant mix, with a cha chaan teng restaurant leasing a prime location for the first time in nearly 20 years.
  • Emperor Watch and Jewelry leased a prime shop at a significantly reduced rent of HK$1.6 million per month.

• Impact on Developers:

  • Weak consumer sentiment and declining sales have affected developers' financial performance.
  • Developers are showing more flexibility in rent negotiations to achieve higher occupancy rates.

• Market Outlook:

  • Retail sales performance is expected to remain soft for the remainder of 2024.
  • A gradual recovery may be seen with easing global interest rates, a potential renminbi rebound, and the influx of top talent.
  • No large retail transactions were observed, but small shops on prime retail streets are seeing increased sales activity.

Key Contacts

• Research & Consultancy:

  • Martin Wong: Senior Director, Head of Research & Consultancy, Greater China
    +852 2846 7184
    martin.wong@hk.knightfrank.com
  • Lucia Leung: Director, Research & Consultancy, Greater China
    +852 2846 4843
    lucia.leung@hk.knightfrank.com

• Commercial Agency:

  • Paul Hart: Managing Director, Greater China, Head of Commercial
    +852 2846 9537
    paul.hart@hk.knightfrank.com
  • Wendy Lau: Executive Director, Head of Hong Kong Office Strategy & Solutions
    +852 2846 4988
    wendy.lau@hk.knightfrank.com
  • Steve Ng: Senior Director, Head of Kowloon Office Strategy & Solutions
    +852 2846 0688
    steve.ng@hk.knightfrank.com

• Residential Agency:

  • Maggie Lee: Senior Director, Head of Residential Agency
    +852 2846 9550
    maggie.lee@hk.knightfrank.com

• Retail Services:

  • Helen Mak: Senior Director, Head of Retail Services
    +852 2846 9543
    helen mak@hk.knightfrank.com

• Valuation & Advisory:

  • Cyrus Fong: Executive Director, Head of Valuation & Advisory, Greater China
    +852 2846 7135
    cyrus.fong@hk.knightfrank.com

Conclusion

The Hong Kong property market in August 2024 showed continued weakness across office and retail sectors, with residential prices hitting an eight-year low but rental demand showing resilience. Market uncertainty, weak economic recovery, and shifting tenant behavior are key factors influencing the current state of the market. While some sectors, such as hedge funds and student housing, are showing signs of growth, the overall outlook remains cautious.