Property Sales in Q2 to Surpass 18,000 S&Ps, but Sentiment is Cautious amid Anticipation of Economic Slowdown

  • Property sales volume rose to 12,118 S&Ps in the first two months of Q2, with the monthly average residential sales more than double the monthly average in Q1, signifying stronger than expected market fundamentals
  • Investors eyeing long-term return became active and showed greater interest in properties with big discount and positive cash flow.

HONG KONG--()--DTZ/Cushman & Wakefield, a global leader in commercial real estate services, reviewed today the performance of the residential and property investment markets of Hong Kong in the second quarter of 2016. After a slew of panic selling in Q1, residential sales improved on both volume and prices, but the market sentiment remains cautious amid anticipations of another rate hike in the US and deterioration in the local employment rate. Meanwhile, for the property investment market, investors were interested in properties with bigger discount in price, such as retail.

After the number of Sales and Purchase Agreements (S&Ps) for all properties fell to 2,802 in February, the lowest level in 20 years, property sales bounced back to 5,821 and 6,297 in April and May respectively. In terms of primary and secondary residential sales, the April and May S&P figures rose to an average of 4,540, which is more than double the Q1 average S&P figure of 2,074. The entire Q2 S&P sum looks set to surpass 18,000, with an estimated S&P figure for June at 6,500.

With the increase in sales, home prices began to halt the falling trend witnessed since Q4 2015 as home sellers became firmer on asking price. As of April, the price index based on selected popular estates began to see some improvement. For representative estates such as City One Shatin and Taikoo Shing, the average net unit price as of June rose by 1.74% and 0.73% from the March level to HK$11,700 and HK$13,800 per sq ft respectively. In contrast, the price of a Leighton Hill flat, which is representative of luxury residential, continued to drop at a milder pace by 2.35% from the March record to HK$33,200 per sq ft in June.

Mr Alva To, DTZ/Cushman & Wakefield's Senior Managing Director of Hong Kong cum Head of Consulting Services, Greater China, commented, "The rebound in home sales is testimonial to the strong market fundamentals – low unemployment rate, low interest rate environment, and a noted surge in secondary home sales that rose to 70% of the total residential transaction volume indicated solid buying power ready for discounted properties, not just a market propped up by developers’ incentives for buyers of primary homes. However, market sentiment is being tested by global market volatility, a slowing China and Hong Kong economy, and another rate hike in the US looming on the horizon, which would affect the mass market more because its buyers are generally more sensitive to interest rate movements. Still, for the outlook, the volume of future supply and the unemployment rate would be the key factors to look at."

The property investment market remained active in Q2, with 49 major transactions (each with a unit value of more than HK$100 million) recorded thus far that netted a total consideration of HK$13.251 billion. Luxury residential remained a favorite of investors and accounted for more than half of the total transaction volume and consideration. Office properties are another attraction for investors but transactions were fewer due to tight availability of grade A office in the market and very firm asking price.

Despite the poor retail sales, the retail sector continued to attract significant interest as shown by the deals by LINK Reit in Q2. Mr Kenneth Yip, DTZ/Cushman & Wakefield's Director of Investment & Advisory Services in Hong Kong, commented, "Investors targeting long-term return felt it is time to buy because some of the retail properties now come with a bigger discount, often to the range of 30%-40% from the peak price. In Q2 we began to see investors who were less active before showing greater interest in biddings. As long as a property has a sizable discount that puts it back to a reasonable price level, can provide positive cash flow and viable, value-added prospects, investors will be interested and some of the transactions were realized on this basis. In these cases, the market sentiment and outlook will be a lesser consideration for these investors."

About DTZ/Cushman & Wakefield

Cushman & Wakefield is a leading global real estate services firm that helps clients transform the way people work, shop and live. The firm’s 43,000 employees in more than 60 countries provide deep local and global insights that create significant value for occupiers and investors around the world. In Greater China, the firm has a co-branded presence under the name of DTZ/Cushman & Wakefield and operates 20 offices in the region. Cushman & Wakefield is among the largest commercial real estate services firms with revenues of US$5 billion across core services of agency leasing, asset services, capital markets, facility services, global occupier services, investment & asset management, project management, tenant representation and valuation & advisory. To learn more, please visit www.dtzcushwake.com or follow us on WeChat (DTZ_China) and LinkedIn (https://www.linkedin.com/company/dtz-cushman-wakefield).

Contacts

DTZ/Cushman & Wakefield
Elisa Yiu, +852 2507 0637
Associate Director
Marketing and Communications, Hong Kong
elisa.ky.yiu@dtzcushwake.com
or
Creative Consulting Group
Esther Kam, +852 3159 2978
esther.kam@creativegp.com
Penn Leung, +852 3159 2986
penn.leung@creativegp.com

Contacts

DTZ/Cushman & Wakefield
Elisa Yiu, +852 2507 0637
Associate Director
Marketing and Communications, Hong Kong
elisa.ky.yiu@dtzcushwake.com
or
Creative Consulting Group
Esther Kam, +852 3159 2978
esther.kam@creativegp.com
Penn Leung, +852 3159 2986
penn.leung@creativegp.com