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Sales rise in Hong Kong residential market


Residential property sales in Hong Kong have increased, up 9.4% from August to September but officials are keeping tax policies in place to try to keep price growth under control.

First hand transactions jumped 110%, while secondary sales declined 15%, month on month, according to the latest data from the Land Registry.

Both demand and supply remained robust in the primary market, with around 360 units launched during the mid-autumn festival holiday, says the latest monthly Hong Kong property market report from international real estate firm Knight Frank.

For example, 110 units in Century Link in Tung Chung and over 200 flats in Upper East in Hung Hom were snapped up within just a few hours.

In contrast, the secondary market remained subdued last month, amid the recent stock market volatility, a potential interest rate rise in the United States and fierce competition from primary developments, the report points out.

It also points out that the Chief Executive has announced that the stamp duty policies will remain in place in the near term. ‘We do not expect home prices to drop significantly,’ the report adds.

Calculations by Knight Frank indicate that a 100-bps increase in mortgage rates will only result in a HK$500 increment in monthly instalment for every HK$1 million of mortgage loan, based on a 20 year repayment period.

‘Therefore, a minor interest rate hike is not expected to lead to a significant default risk. On the other hand, market views do not expect a drastic interest rate hike this year,’ it adds.

Despite strong leasing demand, the Grade-A office market was stable last month amid limited available space, particularly in core business areas, the report also says. Most firms opted for renewing their leases rather than relocation due to a lack of alternatives.

The key demand drivers remained Mainland Chinese firms, which continued to favour Central for setting up offices. As a result, Central’s vacancy rate dropped a further 0.2% point to an extremely low level of 1.4% in September, close to the historical low in 2008.

An increasing trend of operation split was witnessed in the office market due to a lack of vacant space. Many firms have to split their operations into smaller offices located in different buildings. Previously, only major firms requiring large premises needed to split their offices, but now even firms requiring units of below 10,000 square feet are going for such arrangement.

‘With the tight supply and many offices under multiple offers, landlords have become more aggressive in asking rents. If the trend continues, it could be possible to see a reversed premium situation next year, firms requiring large office space have to pay an even higher per square foot rental,’ the report explains.

‘Looking ahead, given sustained demand and low vacancy rates, we remain positive towards the long term outlook for Grade-A offices in Hong Kong. We expect rents in Central to increase 10% this year and another 5% in 2016. In Kowloon East, Grade-A office rents could drop up to 5% next year with increased supply,’ it adds.

Property Wire
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