Number of big deals down by half
The number of major property deals completed in the third quarter in Hong Kong dropped more than 55 per cent compared with the previous quarter. Investor appetite was soured by uncertainties over the global economy and tighter credit on the mainland, according to property consultant DTZ.
However, the total value of all deals priced at HK$100 million or more was up 31.5 per cent to HK$30.38 billion, largely due to the HK$18.8 billion sale of office-retail development Festival Walk in Kowloon Tong by Swire Pacific in August.
The development was sold to Mapletree Investments, a unit of Singapore's Temasek Holdings.
Excluding the big deal, the total value of major sales recorded in the third quarter was just HK$11 billion, compared with HK$23.11 billion in the second quarter, reflective of a cautious sentiment among investors, said Alvin Yip, co-head of investment, China at DTZ.
'If we take a closer look at the market in the third quarter, we can see that property deals of various sizes were affected by the drop in activity, whereas property prices did not suffer big falls that would have resulted from widespread distress sales,' said Yip. 'The few significant transactions in the quarter also showed that investors, in this case foreign investors, continued to treasure-hunt in the Hong Kong market and found prime investment opportunities in various sectors.'
A range of factors led investors to defer buying decisions, said Yip. These included tumbling share prices, the troubled outlook for the world's economy, a rising spread on loans based on the Hong Kong Interbank Offered Rate, increasing costs of investment and concerns about negative cash flows.
A tightening of credit and funding on the mainland also had an impact on the local investment market.
The result was that sales of major luxury residences fell from 30 in the second quarter to only seven in the third quarter. The value of such deals shrank 75 per cent to HK$1.96 billion in the third quarter, from HK$8.1 billion in the second quarter.
'Potential buyers of luxury residential property turned more conservative. [Sellers] were generally not prepared to offer big discounts.'
Yip said there were signs that yields on industrial properties may have begun rising slowly due to changes in their capital value.
'Judging from recent events, although the outlook for the fourth quarter does not call for a definitively positive development, we expect that investors will continue to watch the yield movement of various sectors but will be conservative in making their moves.'