US-China trade war could hurt demand for commercial and industrial property in Hong Kong, says agency
Ricacorp (CIR) Properties expects deals for industrial and office properties to slump by 13 per cent and 15 per cent in second half of 2018
Demand for commercial and industrial properties in Hong Kong could weaken over the next several months as businesses adopt a more cautious approach to expansion amid the trade war between China and the United States, according to the city-based property agency Ricacorp (CIR) Properties. An increase in interest rates could also slow down transactions.
Roy Wong, the agency’s director, said the number of deals for commercial and industrial properties could fall to 4,680 in the second half of 2018, a decline of 12 per cent from the first half.
“The market is worried the US-China trade war could worsen, directly dragging the economy down,” said Wong. “The trade war has made the stock market unusually volatile. If the stock market continues to drop, overall economic performance may be impeded.
“[Banks in] Hong Kong are also very likely to follow in the footsteps of the US and increase [prime] rates in the third quarter, increasing pressure on the market,” he added.
According to the agency, the number of transactions for industrial and commercial properties stretched a four-and-a-half-year rally to hit 5,290 in the first half this year, up 160 per cent from a historic low of 2,022 in the first half of 2016.
Wing Tai Properties sold Winner Godown Building, an industrial building in Tsuen Wan, to a company controlled by the chairman of Billion Development & Project Management for HK$2.16 billion (US$275.3 million) in December.
According to Ricacorp, the trade war may reduce confidence and could make businesses more cautious. “The uncertainty in market outlook, clouded by the trade war, will linger for some time,” said Stanley Chui, its sales director. “Some investors will adopt a wait-and-see attitude. But since most owners are still ambitious in asking prices, the number of transactions will be adversely affected.”
Deals involving mid-range industrial building units worth between HK$10 million and HK$100 million could be hardest hit, said Raymond Chu, the senior sales director at the agency. “The number of industrial property transactions will drop from the first half.”
The agency said it expected the number of deals involving industrial and office properties to slump by 13 per cent and 15 per cent, respectively, in the second half.
The agency said this would make such properties, subject to fewer cooling measures and mortgage restrictions than residential properties, good investment opportunities given their relatively low prices.
Major projects such as Beijing’s “Greater Bay Area” scheme and the Belt and Road Initiative could attract more businesses to the city. Infrastructure projects such as the Hong Kong-Zhuhai-Macau bridge, the Express Rail Link and the Liantang Checkpoint could attract more travellers, which would benefit the retail property market.
Industrial property may also be boosted by government plans to allow owners to convert these buildings into temporary housing for the needy without premium.
Elsewhere, Raymond Tsoi Chi-chung, one of the owners of HK$40.2 billion The Center, said a 26,000 sq ft space he owned on the 22nd floor of the grade A office building would be subdivided to attract more buying interest.
Units starting from 1,600 sq ft would have an indicative price of HK$70 million, he said.
“The sale is expect to kick off in October,” said Tsoi.