Colliers International, Hong Kong

Forecast for Office and Industrial Market Revised Upwards

Amid increasing inflation, local interest rates followed suit the trend of interest rates in the US which were adjusted downward, and consequently created a Golden Cross between the annual change of composite consumer price index and the effective mortgage rate.  As demonstrated in the following graph, the effective mortgage rate is at a lower level than inflation i.e. a negative interest rate, which stimulates buoyant investment demand.

The Golden Cross 

Taking the example of the last Golden Cross that happened in 1991, the property market saw a dramatic growth in the four consecutive years from 1991 to 1994.  If the latest Golden Cross replicates the success of that seen in the early 1990s, it represents a signal for further growth in the property market.  In addition to the negative interest rate, the depreciation of the US Dollar also makes investment in the local market more attractive.  Combining the positive factors mentioned above, the four sectors in the Hong Kong property market are expected to see continued growth.  The following table shows Colliers’ forecast on different property sectors in the twelve months from February 2008 to February 2009:

Colliers International: Forecast for Hong Kong’s Property Sectors (Feb 2008 – Feb 2009 % Increase YoY)

In the Grade A office market, compared with the forecast three months ago, rental projection is revised from 3% to 8% year-on-year (YoY) and capital value projection is revised from 15% to 18% YoY.  Mr. Simon Lo, Director of Research & Consultancy, commented, “The local Grade A office market in Central sees record-low vacancy rate currently at below 1%.  Meanwhile, there are some financial companies seeking office space to expand and they have to consider decentralized areas due to very limited space available in Central.” 

Similarly, the forecast for the industrial market has also been revised upwards compared with that of three months ago.  The rental projection has been revised from 2% to 10% YoY, and the price projection has been revised from 14% to 18% YoY.  According to Mr. Wayal Chiu, Director of Industrial, the growing logistics industry is a key driving force in the market.  

Meanwhile, the forecast for both the luxury residential and retail markets kept at a double-digit growth rate in rent and capital values, underpinned by the positive effects of the negative interest rate.

About Colliers International

Colliers Macaulay Nicolls Inc. (CMN) operating as Colliers International is a leading global real estate services company that provides a full range of services to real estate users, owners and investors worldwide. Colliers operates in 276 offices in 57 countries.  Services include brokerage, property management, hotel investment sales and consulting, corporate services, valuation, consulting and appraisal services, mortgage banking and research.  Colliers International is a worldwide affiliation of independently owned and operated companies.

Contact Information

May Chow        
Regional Manager
Communications and PR, Hong Kong Marketing
Colliers International (Hong Kong) Ltd
Tel    852 2822 0736
Fax   852 2868 5275
Email: May.Chow@colliers.com

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