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Property News Weekly Digest
2019/2/16
〈Asian Post, February 16, 2019〉Prime office rents in the Central business district are forecast to decline by as much as 7 per cent this year as mainland companies pare back their expansion plans amid uncertainties ranging from the US-China trade war to cooling domestic economic growth, according to Knight Frank's latest global outlook report.

"There are already signs of market softening since November, the first time in 29 months. An uncertain China-US trade relationship and the mainland's own market challenges have curtailed demand from some mainland firms for prime office space," said David Ji, the director and head of research and consultancy for Greater China at Knight Frank.

Average rents of grade A offices in Central declined by 0.3 per cent to HK$163.70 per square foot per month in November from the prior month, reversing a rising trend that had lasted for nearly three years.

Knight Frank forecasts that rents will drop 1 to 4 per cent across the city. A sharper drop of 4 to 7 per cent is expected for the Central business district. Meanwhile, the office vacancy rate will edge up to 2.4 per cent by 2021, from 2.3 per cent last year, it said.

Other property consultancies released similarly gloomy outlooks, with Cushman & Wakefield forecasting rents in Central and the nearby areas of Sheung Wan and Admiralty falling by 4 to 6 per cent this year. Colliers International forecasts that grade A office rents in Central and Admiralty will retreat by 3.8 per cent.

The Chinese economy grew 6.6 per cent last year, the slowest growth in nearly three decades, dragged down by factors that included Beijing's crackdown on debt and risky spending.

〈China Daily, February 16, 2019〉Sun Hung Kai Properties (SHKP) won a residential land parcel in Tai Po for a higher-than-expected HK$6.31 billion yesterday, its second successful government land tender in a month.

The price translates to HK$6,646 per square foot, 69 per cent higher than the previous site in the area which sold for HK$3,932 per square foot in 2016 to Sino Land, but 8.8 per cent lower than the peak of HK$7,284 per square foot paid by Sino Land in 2009 for the site now home to Mayfair by The Sea II.

"We are pleased to win the parcel. The scale of development is large so we could build flats of different sizes," said Victor Lui, deputy managing director at SHKP, who estimated the total investment to be HK$12 billion.

The plot was valued between HK$5.2 billion and HK$6.2 billion, or HK$5,500 to HK$6,500 per square foot, according to Knight Frank.

Alvin Lam, director of Midland Surveyors, said: "The demand for housing is more stable because there are end users and investor demand for housing."

He said commercial projects were more volatile as they were driven less by end-user demand and "usually for investment use only".

Last month SHKP paid HK$11.26 billion for a residential site at the former international airport in East Kowloon.

"Developers are still confident on the market outlook," said Thomas Lam, executive director at Knight Frank. "The environment at the site is quiet. The large size also means relatively high flexibility in designing the development."

〈The Straits, February 14, 2019〉Hong Kong's overheated property market may be in for further cooling in the Year of the Pig with investors jittery about the global outlook, especially as simmering tensions between the United States and China drag on.

The city's private residential property prices have fallen by about 10 per cent on average since the peak in August last year, although some individual transactions rebounded, said Mr Tom Ko, executive director of capital markets at Cushman and Wakefield Hong Kong.

In some big luxury estates such as Residence Bel-Air in Pok Fu Lam and The Beverly Hills project in Tai Po, average private residential property prices have plunged by 20 to 30 per cent.

That said, if trade tensions between US and China "cool off a little bit" in the coming months, there would be a rebound in the private residential sector, said Mr Ko.

But Mr Denis Ma, JLL's head of research for Hong Kong, held a gloomier view. "For residential prices, we're saying about 10 to 15 per cent downward turn - basically it reflects our negative outlook for the economy," he told The Straits Times.

Trade tensions between the US and China have added downward pressure to slowing global growth and rising interest rates, which dampen market sentiments.

Mr Ma said 2018 showed that buyers were becoming a lot more cautious "because your sense of job security is diminishing significantly along the course of the year", so transaction volumes in the residential space fell.

〈Asian Post, February 15, 2019〉Oyster sauce tycoon Lee Man-tat, chairman of the Lee Kum Kee Group, saw his family's wealth double over the past year, propelling them into third place in the 2019 Forbes Asia list of Hong Kong's 50 richest families.

While most of the city's top magnates saw their fortunesdecline, the Lee family's wealth gained US$8.6 billion to reach US$17.1 billion, lifting them out of 11th place a year ago.

The list also revealed that the city's elite business class took a financial beating in 2018, with several prominent members losing big chunks of their fortunes.

Their combined wealth fell US$20 billion to US$286.75 billion, mainly thanks to headwinds from the US-China trade war and the economic slowdown on the mainland.

But the losses came after their collective fortunes had climbed by US$60 billion to US$307 billion in the previous year.

Li Ka-shing was once again Hong Kong's wealthiest man, though his net worth dropped by US$4 billion to US$32 billion. Property tycoon Lee Shau-kee of Henderson Land lost US$2.9 billion but remained in second place with a fortune of US$30 billion.

The biggest loser in the past 12 months was Pollyanna Chu, whose firm Kingston Financial Group suffered an enormous share price drop after the market watchdog issued a warningabout the high concentration of shareholding in the firm in January last year.

Chu's wealth dropped 73 per cent, from US$12 billion last year to US$3.3 billion this year.
Others who fared badly included Yeung Kin-man and Lam Wai-ying, the husband and wife owners of Biel Crystal, who saw their fortune collapse by US$6.4 billion to US$4.7 billion. Biel Crystal, which makes glass screens for Apple's iPhones, was the most obvious victim of US-China trade tensions. It has postponed plans to launch an IPO.

〈Asian Post, February 12, 2019〉Hong Kong renters hoping for a prolonged bout of deflation could be in for disappointment in the next few months as data shows rental prices may be about to bottom out, ending a decline that started in August last year.

On average, residential rents dropped 0.3 per cent to HK$35.80 per square foot in January from December, the smallest contraction in the past five months, according to data released by Centaline Property Agency on Wednesday.

"It is a sign showing the end of the correction," said Wong Leung-sing, senior associate director of research at Centaline.

Wong said "more robust" residential sales in January could be an indicator that the rental market will soon begin to firm, as the two markets are positively correlated. He said the rental slump could end by the second quarter.

From a high of HK$37.80 per square foot in August, rents have fallen 5.3 per cent in the five months. January's drop of 0.3 per cent on month compares to the 1.9 per cent decline in December and a 2.1 per cent fall in November.

Centaline compiled the data on its own leasing deals across 107 major residential communities in Hong Kong.

Ricacorp head of research Derek Chan said he believed the pace of decline in rents would continue to slow in the first quarter. Whether rents would switch back to an inflationary footing would depend on home sale trends, Chan said.

He said home prices could stabilise in the second quarter before slowly climbing in the following quarter. "Renters could take the current opportunity to rent as this is a seasonally slack period. The market is likely to heat up in the summer, the traditionally brisk season, and rents are more likely to pick up," Chan added.