With prices and rents hitting all time high, all indications suggest that the end of Hong Kong property market’s bull run is near after almost 24 months of unrelenting spikes. Colliers International projected on December eight that all properties – with the exception of ground-floor retail properties in traditional shopping districts – will enter a down cycle in 2012.
“Over positive buyer sentiments coupled with a dire lack of supply across all sectors have catapulted the local property market – with the exception of luxury residential which saw no change from end 2010 due to the correction in late 2011 – into a booming core with the retail sector taking the lead,” said Richard Kirke, managing director, Hong Kong at Colliers International. “Without substantial economic fundamentals, all that goes up will eventually come down. We are already seeing noticeable weakening signs since the second half of 2011, hence we expect subdued outlook for rents and prices in Grade A office, luxury residential and industrial property sectors in 2012,” he adds. Kirke is also of the belief that ground-floor retail properties in core areas will be the only sector to see continued increase albeit at a slower growth.
Property investment market
In the first eleven months of 2011, there were 792 property investment transactions valued over HK$30million (US$3.85 million) each, which increased 52 per cent y-o-y significantly. Meanwhile, the total transaction value amounted HK$97,702 million (US$12,557 million), representing a rise of 19 per cent y-o-y.
In 2011, retail properties and strata-title offices are the most sought-after, collectively contributing to 80 per cent of the overall investment transaction volume from January to November 2011.
However, after a strong head start in this year, the steam is slowly letting out with the presence of various challenges in store for the property investment market in 2012.
According to Antonio Wu, executive director of Investment Services Asia at Colliers International, factors such as limited supply in the market, the deepening credit crunch as well as the widening gap between the bank’s interest and capitalisation rates will form the core barriers to continued growth in the property investment market.
Wu was also quick to inject that despite the presence of these factors, the investment property market’s outlook for 2012 is not all gloom and doom as investor sentiment and demand are on a forward surge. “We expect en-bloc offices, strata-title offices particularly those in Kowloon East, hotels and serviced apartments to be the hot favourites in the property investment market. All bets are also on industrial assets located in the vicinity, as undoubtedly market growth and potential will rise from the stimulation efforts made by the government’s re-vitalisation scheme,” said Wu.
Luxury residential market
Luxury residential prices edged up six per cent over the period between January and October 2011. However, with a correction at the end of this year, prices by the end of December 2011 are estimated to return to a level similar to that of end 2010. In terms of luxury residential rents, rates were up seven per cent in the first ten months of 2011.
“Prospective buyers are largely made up of end users, estimated at 60 per cent, with buyers from mainland China constituting approximately 15 per cent of the whole pie,” said Ricky Poon, executive director of Residential Sales. “Effective mortgage rates in 2012 are anticipated to continue the uptrend and rise further to over four per cent per annum. In the short term round up, many potential buyers will likely remain a wait-and-see attitude which will in turn bring a quieter first quarter in 2012. With this in mind, luxury residential prices are projected to edge down 13 per cent in 2012.”
On the leasing front, hold back in the inflow of expatriates, particularly in the banking and finance sector, amid global market uncertainty will bring a slowdown in the demand of luxury residential leasing. In the next twelve months, luxury residential rents are projected to drop six per cent.
by Property Report Asia
“Over positive buyer sentiments coupled with a dire lack of supply across all sectors have catapulted the local property market – with the exception of luxury residential which saw no change from end 2010 due to the correction in late 2011 – into a booming core with the retail sector taking the lead,” said Richard Kirke, managing director, Hong Kong at Colliers International. “Without substantial economic fundamentals, all that goes up will eventually come down. We are already seeing noticeable weakening signs since the second half of 2011, hence we expect subdued outlook for rents and prices in Grade A office, luxury residential and industrial property sectors in 2012,” he adds. Kirke is also of the belief that ground-floor retail properties in core areas will be the only sector to see continued increase albeit at a slower growth.
Property investment market
In the first eleven months of 2011, there were 792 property investment transactions valued over HK$30million (US$3.85 million) each, which increased 52 per cent y-o-y significantly. Meanwhile, the total transaction value amounted HK$97,702 million (US$12,557 million), representing a rise of 19 per cent y-o-y.
In 2011, retail properties and strata-title offices are the most sought-after, collectively contributing to 80 per cent of the overall investment transaction volume from January to November 2011.
However, after a strong head start in this year, the steam is slowly letting out with the presence of various challenges in store for the property investment market in 2012.
According to Antonio Wu, executive director of Investment Services Asia at Colliers International, factors such as limited supply in the market, the deepening credit crunch as well as the widening gap between the bank’s interest and capitalisation rates will form the core barriers to continued growth in the property investment market.
Wu was also quick to inject that despite the presence of these factors, the investment property market’s outlook for 2012 is not all gloom and doom as investor sentiment and demand are on a forward surge. “We expect en-bloc offices, strata-title offices particularly those in Kowloon East, hotels and serviced apartments to be the hot favourites in the property investment market. All bets are also on industrial assets located in the vicinity, as undoubtedly market growth and potential will rise from the stimulation efforts made by the government’s re-vitalisation scheme,” said Wu.
Luxury residential market
Luxury residential prices edged up six per cent over the period between January and October 2011. However, with a correction at the end of this year, prices by the end of December 2011 are estimated to return to a level similar to that of end 2010. In terms of luxury residential rents, rates were up seven per cent in the first ten months of 2011.
“Prospective buyers are largely made up of end users, estimated at 60 per cent, with buyers from mainland China constituting approximately 15 per cent of the whole pie,” said Ricky Poon, executive director of Residential Sales. “Effective mortgage rates in 2012 are anticipated to continue the uptrend and rise further to over four per cent per annum. In the short term round up, many potential buyers will likely remain a wait-and-see attitude which will in turn bring a quieter first quarter in 2012. With this in mind, luxury residential prices are projected to edge down 13 per cent in 2012.”
On the leasing front, hold back in the inflow of expatriates, particularly in the banking and finance sector, amid global market uncertainty will bring a slowdown in the demand of luxury residential leasing. In the next twelve months, luxury residential rents are projected to drop six per cent.
by Property Report Asia