Lower rates, cash influx make shops hot property

Shops are expected to change hands briskly in coming months as an influx of hot money and lower borrowing costs for non-residential property spur investment interest, agents say.

Figures from Ricacorp (CIR) Properties indicate transactions in retail properties increased 16 per cent last month from August to 448, and the total value edged up 2 per cent to HK$6.37 billion.

"The inflow of hot money will add fuel to the fire," Kelvin Li Chun-lung, senior sales director at Midland Commercial, a unit of Midland Realty, said.

Danny Chan Chu-hang, national director of Hong Kong capital markets at Jones Lang LaSalle, expects the retail investment market to benefit from positive sentiment.

A growing number of investors were shifting to retail properties because the special stamp duty introduced by the government to cool the red-hot residential market did not apply to the sector, he said.

To cash in on the market boom, Hang Seng Bank is offering three shops occupying the ground floor and the entire first floor of the Kam Heung Building in Aberdeen for public tender through Jones Lang LaSalle. Agents estimate the shops could fetch a bid of about HK$160 million. Tendering will close at noon on January 9.

Flush with liquidity, Wing Lung Bank has cut mortgage rates for commercial properties and for flats held for leasing to 3.1 percentage points below prime, which stands at 5.25 per cent, plus a cash rebate of as much as 0.5 per cent of the loan amount, or a cap of HK$200,000.

Prior to the reduction, mortgage rates for this category of properties were 2.6 to 2.9 percentage points below prime, with no cash rebate.

"Lower borrowing costs and incentives will help to boost transactions," said Ivy Wong Mei-fung, the managing director at Centaline Mortgage Broker.

She said Wing Lung reduced mortgage rates for commercial properties to attract new business because it had found the residential lending market too competitive.

"It is not easy for small to medium-sized banks to compete with big players in the residential lending market," Wong said.

She expects banks to become more aggressive in offering competitive rates for property loans over the next two months, as they have to fill their lending quota by the beginning of next year.