Residential sales in Hong Kong increased by 45% month on month in March from their lowest level in 25 years, reaching 17,106, according to the latest data from the Land Registry.
The rise was attributable to a number of primary project launches after Chinese New Year and a reviving resales market, with some flat owners willing to cut prices, says the latest market analysis from international real estate firm Knight Frank.
As a result, prices fell further, with official figures showing that home prices had decreased for five consecutive months, for a cumulative decline of 11%. But the market continued to polarise, with the luxury sector remaining relatively resilient, it explains.
Reported landmark deals of the month included an en-bloc transaction at South Bay Close in Repulse Bay for HK$668 million, or about HK$30,000 per square foot and a unit in Cluny Park in Mid-Levels West, which sold for over HK$53,000 per square foot, the highest price in the development.
With potential buyers expecting increasing supply and a further drop in home prices, residential sales are expected to fall to around 50,000 units this year.
‘Although luxury home prices overall are expected to drop 5% this year, prices of super luxury houses and apartments should remain firm. Mass market prices could drop up to 10% in 2016,’ the report says.
In the prime office market a lack of available space continued to limit Grade A leasing activity, the report also shows. To avoid high rents in Central, some firms with a long presence in the area relocated to non-core areas as they became increasingly cost conscious, the report explains.
It also points out that high office rents in Central have been supported by a lack of supply rather than strong demand as office leasing demand from both domestic and overseas firms has weakened in recent months.
The Kowloon Grade A office leasing market saw a number of relocation deals involving insurance sourcing companies in March. Office rents in Kowloon East, however, have been under increasing pressure from the increasing supply coming on line, the report says.
‘Despite the economic uncertainties in Hong Kong and the mainland, office rents in decentralised areas could drop 5% in 2016 due to abundant supply in the pipeline. This polarisation trend is expected to continue until the new supply is absorbed and the market regains balance,’ the report adds.
It also says that notable declines in retail sales and visitor arrivals continued to put pressure on retail property rents and adds that the retail property landscape will continue to evolve to cope with the downturn.
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