In the latest Weekly Snippet, we first look at the Kowloon East office leasing market where Ella Lai of Office Services shares her observations. Then it’s on to the residential market with Nancy Chan of Valuation & Advisory Services where she comments on the recent sale of a site in Yuen Long, and what this means for the overall residential market.
Observations from Kowloon East’s office sector
Kowloon East’s office market has been subject to recent high levels of vacancy. Obvious external market factors have contributed to this outcome, but there have been notable transactions in the district that indicate the office sector is recovering, along with the business environment. The timeline for this can be traced back to Q2, just after Chinese New Year, with an uptick in demand, good stock options for occupiers, and attractive rental packages that favour those looking to relocate and avoid a high Capex, leading to improved activity.
As a trigger point, the improvement in economic performance created buoyancy for the business community creating improved confidence. But in Kowloon East, it was the logistics, insurance, and sourcing sectors that were the first to react. This combination of positive change in the market has made an overall impact on occupancy, driving down vacancy rates specifically in ITT, The Quayside and Millennium City 6. We expect there will be more transactions in the area towards the end of 2021.
Buoyant housing market despite COVID-19 pandemic
The provision of residential land is essential for easing the housing shortage problem. The government is attempting to expand the availability of residential space on a number of fronts, and believes that the continuous sale of land could increase the housing units in an undersupplied housing market.
The government land sale at the junction of Lau Yip Street and Chung Yip Road in Yuen Long was won by CK Asset Holdings Limited (“CK Asset”) on a 50-year land grant at a consideration of HK$716 million on 17 August 2021. It has a site area of about 15,208 sq. m. with a minimum gross floor area (GFA) of 4,379.8m² and maximum GFA of 7,299.8 m². The zoning of the site is for private residential purposes. The accommodation value is sold at about HK$9,112 per sq. ft. Per Grace Woo Chia-Chiang, executive director of CK Asset mentioned, the site will be developed as low-rise luxury villas and the selling price per sq. ft. is expected to be HK$15,000 to HK$16,000.
While this is one of the many transactions that has been completed with a higher market price expectation of about 15%, it reflects developer’s confidence and optimism in the private residential market despite the influence of COVID-19, where a boost in the residential price in Yuen Long can be anticipated. Due to the increasing rate of vaccination, the containment of COVID-19 will allow the economy to rebound to its original level and is progressively strengthening. The private domestic sector will gradually recover to buoy the stimulation of micro-economy. We foresee that the price of private domestic properties will eventually increase in the upcoming quarters.