bodyType

customContents

entityId

entityUuid

articlePageQuery

filter

article

articleBaseAdvertisingInfoArticle

articleListArticle

articleSeoArticle

hooksArticleAcknowledgementGateOverlayArticle

hooksTrackPageViewArticle

hooksContentInterestArticle

articleLinkingDataContent

hooksAmpRedirectArticle

articleSchemaContent

liveArticle

advertZone

sentiment

contentLock

topics

types

sections

paywallTypes

createdDate

publishedDate

sponsorType

urlAlias

moreOnThisArticles

commentCount

authorLocations

authors

corrections

displaySlideShow

multimediaEmbed

printHeadline

seriesContainer

articleSpeeches

socialHeadline

headline

images

flag

firstTopic

glossary

flattenTypeIds

image

relatedLinks

relatedNewsletters

__typename

sponsor

pdfFiles

seriesReverseOrder

series

disableOffPlatformContent

published

updatedDate

summary

subHeadline

body

keywords

readingTime

customTimezone

liveContents

SCMP Reporter

Transactions will remain slow as the market consolidates

Rising interest rates will probably dampen the trading of commercial properties in the near future as an uncertain market outlook drives investors away, according to industry players.

The falling level of investment in shops and office buildings might slow  transaction volumes and price growth in the next few months, they said.

'Sentiment has been souring amid the rising interest rates. Trading activities in the retail market have been relatively sluggish recently as many property owners are standing firm on their prices while many potential buyers are waiting for prices to fall,' said Midland Realty retail department sales director Tony Lo Chin-ho.

Mr Lo expected prices of shops to drop by 5 per cent in core retail districts such as Causeway Bay and Mongkok, and by 10 to 15 per cent in non-core areas such as Wan Chai and Jordan in the short term.

The number of shop transactions last month fell 42.27 per cent year on year to 321, with transaction values plunging 44.9 per cent year on year to $2.16 billion, according to provisional figures compiled by Centaline Property Agency and the Land Registry.

Transactions for shops by confirmors - investors who buy a property and resell it before the transaction is completed - dived 83.14 per cent year on year to 29 deals last month, provisional figures showed.

Stanley Poon Chi-ming,  general manager at Centaline Property Agency's retail department, said the rapid rise in interest rates had hurt investment returns,  causing many potential investors to stay on the sidelines.

'An investor could hardly cover his mortgage when he is paying prime rate [now at 7.5 to 7.75 per cent] minus 2 per cent while the average investment yield for a shop is still 5 per cent a year,' Mr Poon said.

He expected  the market would take a breather and the number of shop transactions this month and next  would also slow.

However, the long-term outlook was still positive because the economy was growing, he said.

Meanwhile, property consultants said the investment market for office buildings appeared to be more resilient than it was for retail, although sentiment in the sector was affected by the continuous rate increases.

The number of office sale and purchase transactions last month fell 21.21 per cent year on year to 208, with the value of the deals down 12.37 per cent year on year to $1.7 billion, according to figures from Centaline and the Land Registry.

Confirmor transactions for the office market fell 4.35 per cent to 22 deals.

Ricacorp Surveyors assistant district director Jeff Wong  Kwok-ming said: 'The rapidly rising interest rates have obviously slowed down investment sentiment for office buildings since the second half, although the fundamentals of the market are still sound.

'We expect trading volume in the office market to consolidate by 10 to 15 per cent and prices to drop less than 10 per cent in the near future.'

Desmond Poon Chi-ming, associate director at Chartersince Surveyors,  also expected the trading volume in the office market to slow.

However, he believed the upward trend in office rents and the tight market supply could offset the uncertainty of interest rate increases.

'Many investors in the office market have deep pockets. These investors can afford to hold on to their properties and are in no rush to sell,' he said.

'So we expect the trading volume will slow in the months to come but prices are unlikely to come down much.'



Retail to feel the pinch