HONG KONG--(BUSINESS WIRE)--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 final quarter of 2016 and gave a roundup of the year. 2016 is a year of dramatic change in home sales, but despite the variations, the rise of home prices remained relentless, that new measures launched last month have yet to dent the growth trajectory which is supported by the pent-up demand, sound fundamentals and tight supply. The property investment market also witnessed the biggest consideration in 10 years, with luxury residential and office dominating the wish list of investors.
The sluggish market sentiment that was triggered by the global stock market turmoil in Q3 2015 affected buyers’ confidence at the beginning of this year. Property sales volume plunged to 2,802 Sales and Purchase Agreements (S&Ps) in February, among them 1,807 transactions were residential, which was a low in 20 years. Nevertheless, the market bounced back since Q2 and property sales increased from 18,372 S&Ps to 22,940 S&Ps in Q3, up 25% quarter-on-quarter. This indicated a resume in confidence and the pent-up demand was channeled to the various primary projects and second-hand homes. The momentum continued into Q4 with 17,608 transactions recorded in October and November combined, already surpassing the total volume in Q4 2015 by 15%. However, the new government cooling measures launched in early November put the brakes on the sales of secondary homes and slowed the pace of primary launch too. This is expected to dent the Q4 2016 volume to an estimate of 23,608 transactions – 6% down from the 2015 record.
After a quarterly drop in Q1, home prices has been rising ever since. The prices of some representative mass residential estates, such as City One Shatin and Taikoo Shing, have risen by 12.1% and 11% from January to December, to HK$13,900 and HK$16,400 per sq ft respectively. Compared with the trough in April, the price increase of these two estates within the same period are both about 20%. Prices of luxury residential, for example Residence Bel-Air, also witnessed a double-digit growth of 14% from the trough level in April to HK$21,700 per sq ft in December.
Mr Alva To, DTZ/Cushman & Wakefield's Senior Managing Director of Hong Kong and Head of Consulting, Greater China, commented, "The market sentiment and economic fundamentals have a direct impact on the volume and price trend, as seen in Q1 this year when buyers' confidence was undermined by global economic uncertainties. However, since the recovery in Q2, the buying momentum has been growing, supported by a keen demand based on strong fundamentals: on one hand, Hong Kong's economy continued to pick up in the last two quarters, which edged towards the higher-end of government's growth forecast; on the other hand, the supply of private housing completion has been falling over the last two decades, from an average of 26,915 units during the 1990s to 19,882 units in the 2000s, and further down to an estimated 15,401 units during the 2010s. The growth in home prices is thus on good grounds. The recent introduction of the new stamp duty measures not only dented the sales of secondary homes considerably but also slowed the pace of primary projects launch, which added to the strain on tight supply. Thus we believe that home prices will still be on the upward track in 2017."
The property investment market is expected to record 90 major transactions (each with a unit value of more than HK$100 million) with a total estimated consideration of HK$32.012 billion in Q4. Wrapping the year, there would be 307 major transactions netting a total consideration of HK$121.999 billion. While the transaction volume should lag behind 2015, the year-end consideration would be the highest in the last decade. This is mainly due to the considerable increase in asset price, especially in the en-bloc office sector which was propped up by Mainland Chinese capital and interest.
Meanwhile, luxury residential has attracted the largest share in terms of volume and considerations in 2016, where an estimated 157 transactions totaling HK$40.826 billion were on this sector. Mr Tom Ko, DTZ/Cushman & Wakefield's Executive Director of Investment & Advisory Services in Hong Kong, said, "Q4 was interesting, as the launch of new units to the market in recent months, and the increasing practice of buyers making purchase under their own names instead of their companies to avoid the extra stamp duties, have both contributed to the rise in luxury residential purchase in the last quarter, which again showed that buyers remained confidence in the prospects of residential properties."
Apart from asset value appreciation, the investor profile is also a factor behind the record-high considerations for this year. As local investors, international funds/institutional investors and Mainland capital are all eyeing the Hong Kong property market, their preference for property sectors, for example, Mainland investors' love for trophy assets, and also the kinds of transactions realized such as those of en-bloc offices and bundle purchase, would affect the deal size. Mr Ko said, "We expect mega deals will continue to appear in 2017, making it more likely for the considerations to reach for higher ground."
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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).