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Future Direction of the Property Future Direction of the Property Market in Hong Kong & Macau Market in Hong Kong & Macau
Nicholas BrookeNicholas Brooke, , FRICS FHKISFRICS FHKIS
Chairman, Professional Property Services Chairman, Professional Property Services 5 June 20075 June 2007
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2006 Recommendations2006 Recommendations
Soho District – up 15-20% dependent on Soho District – up 15-20% dependent on propertyproperty
Discovery Bay – up 15- 20% on small to Discovery Bay – up 15- 20% on small to medium low and mid-rise propertiesmedium low and mid-rise properties
Hope you bought in both Soho and Hope you bought in both Soho and Discovery BayDiscovery Bay
If not, what should you do this year? If not, what should you do this year?
Soho District, CentralSoho District, Central
Discovery Bay, LantauDiscovery Bay, Lantau
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BackgroundBackground
Sales volume fluctuated during early 2006, Sales volume fluctuated during early 2006, notwithstanding reduced concerns over interest notwithstanding reduced concerns over interest ratesratesHowever, total transactions still exceeded However, total transactions still exceeded 100,000 in 2006100,000 in 2006Some impact on pricing but luxury market Some impact on pricing but luxury market remarkably strongremarkably strongClear emergence of growing divergence Clear emergence of growing divergence between luxury and mass market trendsbetween luxury and mass market trends
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The Arch, West KowloonThe Arch, West Kowloon
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Current SituationCurrent Situation
Noticeable improvement in sales volumes 2007 Noticeable improvement in sales volumes 2007 – over 51,000 transactions in 5months– over 51,000 transactions in 5monthsVariety of new releases and competitive loan Variety of new releases and competitive loan packagespackagesRecent land auctions for luxury residential sites Recent land auctions for luxury residential sites have been well contestedhave been well contestedRents and prices risen in luxury sector but mixed Rents and prices risen in luxury sector but mixed signals form mass residential marketsignals form mass residential marketStock market boom good for sentiment but a Stock market boom good for sentiment but a sustained correction here or in Shanghai could sustained correction here or in Shanghai could have adverse impacthave adverse impact
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The Bel-Air, PokfulamThe Bel-Air, Pokfulam
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Rents and Prices –Rents and Prices –Luxury MarketLuxury Market
Luxury prices on Hong Kong Island averaged Luxury prices on Hong Kong Island averaged HK$10,020 psf during Q1 2007HK$10,020 psf during Q1 2007
Flat prices on the Peak averaged HK$13,500 Flat prices on the Peak averaged HK$13,500 psf whilst a penthouse in The Legend sold for psf whilst a penthouse in The Legend sold for HK$33,000 psfHK$33,000 psf
Luxury house prices averaged HK$18,000 Luxury house prices averaged HK$18,000 psf on Hong Kong Islandpsf on Hong Kong Island
rents on the Island averaged HK$36.00 psf rents on the Island averaged HK$36.00 psf per month with Peak averaging HK$45.00 psfper month with Peak averaging HK$45.00 psf
Luxury Residential Capital Value
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Rents and Prices – Rents and Prices – Luxury MarketLuxury Market
Very low vacancy rate - below 3.0% Very low vacancy rate - below 3.0% Leasing market expected to remain Leasing market expected to remain strong in 2/3Q 2007 – 10% upliftstrong in 2/3Q 2007 – 10% upliftLuxury prices on Hong Kong Island rose Luxury prices on Hong Kong Island rose 22% in Q1 2007, Kowloon 10% and 22% in Q1 2007, Kowloon 10% and New Territories 37% New Territories 37% Further increases in the sales prices Further increases in the sales prices expected during the year – 15/20%expected during the year – 15/20%
Luxury Residential Rental Value
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Rents and Prices – Rents and Prices – Mass Residential Market Mass Residential Market
Prices eased slightly over Q1 2007 to average Prices eased slightly over Q1 2007 to average HK$4,700 psf across Hong KongHK$4,700 psf across Hong Kong
New projects being released a few units at a New projects being released a few units at a timetime
Although economic conditions continue to Although economic conditions continue to improve, this sector is affected by major improve, this sector is affected by major changes in Hong Kong demographicschanges in Hong Kong demographics
Population hollowing – negative growth territoryPopulation hollowing – negative growth territory
Dependent on newly weds and upgradersDependent on newly weds and upgraders
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Future SupplyFuture Supply
Debate as to adequacy of future supplyDebate as to adequacy of future supply
Predicted to be of the order 15,000 p.a. – Predicted to be of the order 15,000 p.a. – cf 30-35,000 when Hong Kong in growth cf 30-35,000 when Hong Kong in growth modemode
Government control of land supply should Government control of land supply should underpin pricesunderpin prices
Modest growth anticipated in line with Modest growth anticipated in line with GDP performanceGDP performance
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Future SupplyFuture Supply
Purchase for investment by PRC and Purchase for investment by PRC and Asian nationals likely to fuel demand for Asian nationals likely to fuel demand for luxury propertyluxury property
Repositioning of real estate as an asset Repositioning of real estate as an asset classclass
Most investors increasing their allocation Most investors increasing their allocation to real estateto real estate
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2007 Best Buys2007 Best Buys
Luxury houses in the New TerritoriesLuxury houses in the New Territories– Lifestyle choice for manyLifestyle choice for many– Buy on estates, not in villagesBuy on estates, not in villages– Require good accessibility to MTR or KCRRequire good accessibility to MTR or KCR– Significantly cheaper than on the Island or in Significantly cheaper than on the Island or in
KowloonKowloon
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Office SectorOffice Sector
Growth in economy continues Growth in economy continues – 2005 – GDP 7.5%2005 – GDP 7.5%– 2006 – GDP 6.9% 2006 – GDP 6.9% – 2007 – GDP 5.6 in Q12007 – GDP 5.6 in Q1
Little new supply in short term except in Little new supply in short term except in decentralised areasdecentralised areas
Central rents continue strong; secondary Central rents continue strong; secondary districts less sodistricts less so
Office Rental ValueHK$psf pm (Net Effective)
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Office SectorOffice Sector
Renewed emphasis will be on Renewed emphasis will be on decentralisation due to high Central rentsdecentralisation due to high Central rents
Weight of institutional funds will maintain Weight of institutional funds will maintain high value regimehigh value regime
Disconnect between yields and capital Disconnect between yields and capital valuesvalues
Opportunities for small investors in Opportunities for small investors in decentralised areas decentralised areas
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MacauMacau
Receiving increased attentionReceiving increased attention
Increases in values in 2004/05 of 50% - Increases in values in 2004/05 of 50% - but now slowed and in some cases but now slowed and in some cases declineddeclined
Reality little of quality except for new Reality little of quality except for new projectsprojects
Many units in hands of speculatorsMany units in hands of speculators
Many new units under constructionMany new units under construction
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One Macau ResidencesOne Macau Residences
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MacauMacau
Prices average between HK$2,500 – Prices average between HK$2,500 – HK$3,300 per square foot butHK$3,300 per square foot but
One Central (Hongkong Land) selling at One Central (Hongkong Land) selling at HK$5-6000 per square footHK$5-6000 per square foot
Wait on new developments proposed Wait on new developments proposed around Nam Van Lakes around Nam Van Lakes
Likely to set new benchmark of qualityLikely to set new benchmark of quality
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2007 Best Buys2007 Best Buys
New (off plan) luxury units in MacauNew (off plan) luxury units in Macau– Lower cost of entryLower cost of entry– Strong rental market in the futureStrong rental market in the future– Limited supplyLimited supply– Many overseas residents expected to arrive Many overseas residents expected to arrive
in coming years to staff new casinosin coming years to staff new casinos– Improved links to Hong Kong and Zhuhai in Improved links to Hong Kong and Zhuhai in
futurefuture
Thank youThank you
Professional Property Professional Property Services LimitedServices Limited
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