According to JLL's August 2018 Property Market Monitor, office rents in Hong Kong's Wanchai/Causeway Bay areas increased 1.5 percent month over month in July 2018, the fastest rate in three years. The submarket's reasonably strong increase was fueled by an extraordinarily tight vacancy environment, which fell to a new low of 1.6 percent last month. real estate in qatar
In July, the average monthly rent for Grade A offices in Wanchai/Causeway Bay increased to HKD 68.7 per sq. ft, reflecting this trend. Monthly rents in Tsimshatsui increased by 1.0 percent month on month to HKD 51.5 per sq. ft, owing to a 1.3 percent month-on-month increase in office buildings along Canton Road. Rents increased by 0.8 percent month over month in the total market.
On the back of expansion demands from banks and financial firms, new lettings in Central increased by 109 percent m-o-m. Oriental Patron leased 13,900 square feet at One Exchange Square, while Hong Kong Exchange and Clearing leased 13,000 square feet at Two Exchange Square, both for in-house expansion.
According to Alex Barnes, JLL's Head of Markets, "Outside of Central, leasing activity remained active last month. Tenant decentralization aided lease demand, resulting in a net take-up of 250,700 square feet in July. Tenants are moving to new office buildings in Wong Chuk Hang and Quarry Bay as space in Central becomes scarce. Tenant demand has been strong this summer, fuelled in part by the change of ownership in The Center and the reconstruction of Hutchison House."
JLL's Head of Research, Denis Ma, stated, "Despite the increasing trade war between the US and China, Hong Kong's property market continues to grow. In terms of commercial property, demand for office space from both tenants and investors remains robust, while the retail sector's recovery continues apace, with retail sales increasing for the fifth month in a row in July. Despite the increased uncertainty about the economy's prognosis, buyers in the residential sector remain optimistic. Demand remains strong in the warehousing industry, which is anticipated to be the most impacted by the trade war, with a number of 3PLs expanding their operations in July. Overall, we expect that Hong Kong's housing market will perform well this year, even if growth slows slightly in the second half "..
To avoid the new vacancy tax, Hong Kong luxury condos have entered the leasing market.
According to the latest Hong Kong Residential Sales Market Monitor study from global property consultant JLL, approximately 1,500 luxury apartments (Class E flats with a saleable area of 1,722 sq. ft. or more) will be completed in the next 30 months. Developers are likely to shift more unsold luxury flats from the sales market to the leasing market in order to mitigate the impact of the new vacancy tax.
The government announced a new vacancy tax at the end of June 2018, levied at 200 percent of the rateable value of unleased or unsold units one year after the issuance of the Occupation Permit — twice the annual rent, which under current market conditions translates to about 5% of the property price. In addition, regardless of the sales method, developers will be expected to launch at least 20% of the units highlighted in the pre-sale consent application at each turn of sales.
Following the announcement of the new tax, Sun Hung Kai Properties revealed plans to lease out all 140 units in Tower 6 (about 20% of the total units) at "Victoria Harbour" in North Point as serviced apartments.
JLL's Regional Director of Capital Markets, Henry Mok, commented, "We expect more developers, particularly those in non-core luxury residential areas, to put unsold stock for lease to avoid the tax, given the increased pressure to offload luxury stock in the short term and recent improvements in leasing demand. However, because luxury properties often take longer to sell, this tendency is likely to be more noticeable at the top of the market."
JLL's National Director of Research, Cathie Chung, added, "Given that 56 percent of all new future luxury flats completed over the next 30-months will be located in the New Territories, developers of unsold luxury flats in the New Territories are more likely to consider switching units to the leasing market. The inauguration of Shrewsbury School, Malvern Collage, and French International School in the New Territories earlier this year could help to strengthen the leasing market. Overall, we estimate luxury rental prices to stay stable in 2018, albeit increased supply is likely to put downward pressure on rents."