During Q4 2018, market uncertainties around the US-China trade disputes, weak stock markets and rising interest rates persisted, setting a business sentiment of caution across all property sectors in Hong Kong. As we enter 2019, the slowdown in most property sectors is likely to continue, though there are signs of opportunity.
During Q4 2018, companies put expansion plans on hold as the overall business environment remained gloomy; and although the US-China trade tensions did not intensify, uncertain market conditions persisted. Leading Hong Kong’s office market to a slow start in 2019.
Due to a slowdown in expansion plans, particularly from banking and finance, as well as mainland Chinese companies, we expect CBD rents to recalibrate, declining by 3.8% in 2019. Yet, because of the low vacancy rents and the ongoing decentralisation trends, rents in other districts should stay firm.
A subdued stock market, rising interest rates, increasing loan rations and a slower economic outlook for 2019 all suggest residential prices will slide further in 2019. A deceleration of the global economy in Q4 could further dampened buyer confidence, even thought the market is experiencing steady demand for leasing and firm residential rents.
Luxury residential leasing properties should stay immune to the downside risks, as landlords haven’t aggressively increase rents since 2014. With this in mind, we recommend families look to other districts in the Kowloon and the New Territories for more affordable options.
Weak stock markets, the US-China trade spat, and a weak RMB have all clouded the spending sentiment for both tourists and residents during Q4. Still, retailers have kept expanding, albeit at a slower pace. Smaller shops in prime locations have become highly sought after, while high-street rents have mostly stabilized.
While uncertainty continues, increasing tourist numbers, together with new infrastructure and rising household incomes, should support an upward trend in Hong Kong’s retail market.
Despite a deceleration in external trade figures – a decrease in exports of 1.0% yoy in November, demand for industrial space in Hong Kong remained strong, both rents and prices for warehouses and factories saw increases during Q4.
We expect the industrial market to benefit from the revitalization scheme and a lack of new industrial supply, which should prompt investors to consider industrial properties which could be revitalized for non-industrial use.