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Hong Kong property
Opinion
Nicholas Spiro
Nicholas Spiro

The View | Why Hong Kong housing and office markets are facing very different supply shocks

  • The city’s office market is about to contend with a rare wave of new supply that will put the leasing market under renewed pressure
  • The housing market, meanwhile, is struggling to overcome a dearth of suitable land, more expensive construction materials and labour shortages

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Blocks of flats under construction near Kai Tak on December 16, 2020. Right now, the pandemic-driven surge in the price of construction materials and shortages of labour are adding to the housing supply crunch. Photo: Sam Tsang
Nicholas Spiro
The performance of Hong Kong’s property industry varies sharply depending on the sector. The city’s retail market has suffered a series of crippling blows in the past several years, with the pandemic-induced closure of the border with the mainland just the latest – albeit the most severe – calamity to befall the sector.
The industrial and logistics market, on the other hand, has benefited from the virus-driven surge in demand for warehouse space and growing interest among investors in redeveloping older industrial buildings.

Among the top 10 commercial property deals last year, five were industrial transactions. The sector accounted for 37 per cent of investment activity, according to CBRE data.

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The divergence in performance is particularly evident in the office and residential sectors. Despite increasing signs that the recovery in the grade A office market is gaining traction, with stronger momentum in leasing activity last year, prime rents continue to fall year on year while three of the city’s five major districts have double-digit vacancy rates.

Hong Kong’s housing market, by contrast, has remained remarkably resilient in the face of a succession of crises. In the secondary market, home values have risen a further 5 per cent since the start of the pandemic and are close to their all-time high set in July 2019, according to data from Centaline. Total transactions last year reached their highest level since 2012.

10:08

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Yet, despite their diverging fortunes, the office and residential markets suddenly face the same challenge. There is a supply shock that threatens to exacerbate problems in both sectors.

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