Office properties tipped to beat out homes as investments

PUBLISHED : Wednesday, 15 December, 2010, 12:00am
UPDATED : Wednesday, 15 December, 2010, 12:00am

Office properties are forecast to replace residences as the most popular investment choice next year as additional stamp duty and tighter mortgage lending dents home buying.

Property consultants expect office rentals will increase by 10 per cent to 25 per cent due to increased demand.

'Offices are expected to remain popular among investors, as they have a better yield prospect over retail,' said Alvin Yip, DTZ's co-head of investment for China. 'Their price gain has lagged behind luxury residential, and most of all they are subject to fewer regulations and market fluctuations.'

DTZ projected that office rentals would climb a further 10 per cent after increasing 35 per cent in the first 11 months of this year. Savills forecast that grade-A office rentals could increase 25 per cent overall and 35 per cent in Central.

Colliers International tipped that rentals of ground-floor retail properties in Central, Causeway Bay, Tsim Sha Tsui and Mongkok would go up 20 per cent due to the limited supply.

'Looking forward, the leasing demand of retailers, particularly the international brands, remains strong with aggressive business in the coming year. This will translate into a driving force on the rentals,' said Simon Lo, director of research at Colliers.

Commenting on the residential sector, DTZ consultant Alva To believed home prices would fall by 10 per cent in the near term.

The price adjustment comes after the government began levying additional stamp duty of between 5 per cent and 15 per cent on flats resold within two years from November 20. At the same time, the Hong Kong Monetary Authority reduced the amount banks could lend to buyers of homes worth HK$12 million or more from 60 per cent to 50 per cent of the price. The maximum mortgage ratio for properties priced between HK$8 million and HK$12 million was cut from 70 to 60 per cent.

To said home prices had begun to show signs of softening and wiped out gains made in October following last month's austerity measures introduced by the government.

For instance, DTZ said the average unit price in Taikoo Shing rose 1.8 per cent month-on-month in October to HK$8,500 per sq ft, before coming down 1.8 per cent to HK$8,350 per sq ft last month.

Untouched by the tightening in mortgage lending, a penthouse comprising 1,280 sq ft plus a 650 sq ft rooftop garden at residential development TwoTwoSix in Sheung Wan sold for HK$23.3 million. That represents HK$18,359 per sq ft, setting a record in terms of floor area for a Sheung Wan low-rise development.