Concerns about austerity measures and interest rate rises will see Hong Kong property transactions decline next year, but short supply will limit any fall in prices, global consultancy Jones Lang LaSalle said yesterday.
Average monthly residential transactions slumped 38 per cent to 4,200 in the first 11 months of this year, compared with a monthly average of 6,800 for the whole of last year, on the back of increases in stamp duty.
Developers have offered price discounts to lure buyers, leading to a 2.6 per cent retreat in capital values in the mass residential market and a 1.9 per cent decline in the luxury segment for the first 11 months of the year, data from the company showed.
It estimated that 16,800 residential units are scheduled for completion next year, 15,400 in 2015 and 18,000 in 2016.
"We expect sales activity to remain weak, given the downside risks from looming interest rate hikes and the potential for yet more policy measures from the government next year," said Joseph Tsang, the managing director of Jones Lang LaSalle Hong Kong.
"Nonetheless, we do not anticipate a free fall or collapse in home prices, as long as the prolonged low interest rate environment and tight supply situation remain."
The city's retail market will receive a boost from mainland shoppers next year, especially those from lower-tier cities looking for mid-priced products and affordable luxury, Jones Lang LaSalle's head of Hong Kong retail Tom Gaffney said. This will benefit mid-end retailers and support a moderate 2 per cent to 4 per cent gain in retail rents for the whole of 2014, he said.
Retail rents in prime shopping centres edged up 4.7 per cent in the first 11 months of this year owing to limited supply, with exorbitant rents pushing an increasing number of retailers to open new stores in non-core locations.
Office rents are also expected to trend higher, by about 5 per cent, next year, underpinned by improved demand amid a global economic recovery, low vacancy rates, tight supply and increasing tenant affordability, said Ben Dickinson, Jones Lang LaSalle's head of markets in Hong Kong.
Although about 894,000 square feet of new Grade A office space is expected to hit the market next year, most of it is destined for strata-titled sales or will be in non-traditional business areas, providing limited leverage for large corporate occupiers, the consultancy said.
Investment in the property market would remain subdued next year, with sentiment likely to deteriorate further, it said.
The total value of property investment in the city amounted to HK$50 billion in the first 11 months of this year, down more than 50 per cent compared with the whole of last year.
The company anticipates the capital value of residential property will fall by 10 per cent to 15 per cent next year, with that for commercial properties likely to remain stable after hitting record highs this year.