27 July 2017
Greater China Quarterly Property Market Report 2017 Q2
CURBING MEASURES REDUCE HOME SALES BUT PRICES REMAIN RESILIENT IN HONG KONG AND ON CHINESE MAINLAND
In the second quarter (Q2) of 2017, Grade-A office markets were generally stable and rents remained steady in major Chinese Mainland cities. In Beijing and Shanghai, rents are expected to face downward pressure, with ample new supply coming on stream in the remainder of the year. In the residential market, continual cooling measures are expected to slow down the pace of home price growth. Facing fierce competition from e-commerce, shopping centres in Greater China continued to upgrade their physical facilities and software to enhance shopping experience and attract footfall.
In Q2, two prime office buildings were launched in Beijing, driving up Grade-A office rents. In Shanghai, the market was quiet, with rents and the vacancy rate remaining unchanged from Q1, while leasing activity fell in some office submarkets. No new offices were added to the Guangzhou market, where the vacancy rate dropped and rents grew further.
In Hong Kong, office rents will increase further in Hong Kong Island’s CBDs amid the tight availability, while rents will come under pressure in Kowloon, with ample supply in the pipeline. Taipei’s office rents rose modestly and the vacancy rate fell steadily. Most leasing demand came from emerging tech companies with stronger rental affordability.
In the next 12 months, Beijing’s CBD will see ample new supply of office space, which is expected to notably reshape the market’s landscape. In Shanghai, a considerable amount of new supply will come onto the market in the second half of the year. Landlords are expected to offer greater concessions and lower asking rents. In Guangzhou, office rents will remain stable with limited supply in the short term. In the core areas of Hong Kong and Taipei, rents are expected to rise further this year.
Affected by the purchase restriction, Beijing’s luxury residential sales dropped in Q2, but prices remained firm. The Shanghai luxury market witnessed growth in both sales volume and prices, with end-users becoming the dominant buyers. Affected by government regulatory measures, developers were cautious and delayed project launches. With no new supply in Q2, the Guangzhou market focused on absorbing inventories, resulting in an almost 50% sales fall quarter on quarter.
In Hong Kong, despite various cooling measures, luxury residential sales surged in Q2 amid robust demand. In Taipei, a further 20% cut in the luxury home holding tax potentially is anticipated to boost end-user demand.
With recent property curbs and stringent regulations, luxury residential sales are set to fall in Beijing and Guangzhou. Nevertheless, sharp declines in prices are not expected amid stable market demand. In Shanghai, the market will continue to see growth in both sales volume and prices with strong rigid housing demand. In Hong Kong, increasing supply and interest-rate rises will help suppress price growth. In Taipei, luxury residential demand will come mainly from end-users, but sentiment will remain weak and prices will continue to drop.
The Beijing retail market recorded positive overall performance in the quarter. Shopping centres and other retail facilities endeavoured to attract consumers by enhancing the brand mix. The Shanghai market was active with six new shopping malls opened, providing nearly 450,000 sqm of retail space in total. No large shopping centres were launched in Guangzhou in Q2, where the vacancy rate remained low and rents rose modestly.
In Q2, both visitor arrival and retail sales figures recorded positive growth in Hong Kong, reflecting that the market had reached the bottom. Taipei’s small retail spaces saw notably lower vacancy rates, with new international cosmetics and decorations brands entering the market as a new force.
In the coming year, shopping centres on the Chinese Mainland will continue to transform towards an experience-focused trade mix, in response to shifting consumption trends, in order to combat strong competition from e-commerce. Landlords will actively adjust their brand portfolios and store layouts and continue to upgrade their physical facilities and software to attract footfall. In Hong Kong, the retail market is expected to continue recovering and the decline in rents is expected to narrow in the next few months. With international visitor arrivals to Taipei hitting historic highs, retail rents are expected to increase 5-10% in the coming year.
To view the full article, please go to page top to download the PDF version.