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Drop likely to continue in property in price and
rent next year
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Dec 17, 2008 |
Property prices and rentals in Hong Kong are
plunging across the board as the year draws
to a close - and the retreat is expected to
continue in the new year, experts say.
But though there is consensus that the
global financial crisis will ensure a
continued decline in prices and rents in
2009, analysts are less certain how long the
retreat will last and how low prices may go
before they hit bottom.
"An analyst makes predictions based on
previous history. But we have not had such a
crisis in the past 100 years," said Simon Lo
Wing-fai, director of Colliers' research and
advisory division.
Given the difficulty of making reliable
forecasts in the present volatile climate
the best bet from analysts is that the
downturn in the property market will last
more than a year.
That outlook assumes Hong Kong's GDP could
decline as much as 5 per cent next year,
taking the unemployment rate up to 5 per
cent.
"Prices and rents in all segments have
plunged more sharply than expected in the
past few months," said Mr Lo. "Developers,
landlords and speculators reacted
aggressively, slashing prices immediately
after the collapse of Lehman Brothers in
September."
That view was endorsed by property agents
who said some owners seeking a quick sale of
luxury homes had slashed prices as much as
50 per cent in the past two months. Jones
Lang LaSalle said luxury home prices had so
far fallen 18.9 per cent on average in the
fourth quarter.
"Office prices are likely to show a decline
of 30 to 35 per cent once fourth-quarter
data is in and that will be a record fall
since we began keeping data in 1992," said
Savills senior director Simon Smith. Average
capital values of grade A office space in
Central were expected to fall about 46 per
cent this year and could even fall another
15 per cent next year, he said.
The downturn in the office market was
triggered by the downsizing and closures
that followed in the wake of the global
financial crisis and brought an end to a
growth cycle that had seen rents rise for 20
consecutive quarters from the third quarter
of 2003.
"In 2009, we will see more companies
downsizing and surrendering space, leaving
new letting demand to be driven mainly by
relocation requirements as tenants seek
cost-saving solutions in non-core
districts," said Gavin Morgan, international
director of Jones Lang LaSalle.
In Central, Mr Lo predicted rentals of grade
A offices would eventually settle about 50
per cent lower than they were at the last
peak in the third quarter of this year.
In the residential sector, analysts expected
luxury home rents to fall a further 20 to 25
per cent next year after a fall of 15 per
cent in the fourth quarter as investment
banks laid off staff and cut housing
allowance budgets.
But buyers of small to medium-sized homes
began returning to the market last month,
with developers such as Sun Hung Kai
Properties and Henderson Land Development
generating good sales from new launches.
Ricacorp Properties said there were 248
transactions in the secondary market during
the week from December 8 to 14, up 34 per
cent from the previous week. "But when
buyers look back at their deals this time
next year, they will find they paid too
much," said Patrick Chow Moon-kit, Ricacorp
research manager.
Mr Smith said the real economy in Hong Kong
would feel the pain of a slowing US and
Europe with a knock-on effect on employment.
But new supply levels were low and this
would provide some support for values.
Source: South
China Morning Post |
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