Hong Kong Mid Year Report 2011 JLL

8/4/2019 Hong Kong Mid Year Report 2011 JLL

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Hong Kong Real Estate

Market Review1H 2011

13 July 2011

Review


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Key market observations

observations


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Accelerating growths in 1H11 despite rising economic

uncertainties and higher barriers set for home buyers

0

1

2

3

4

5Global Economic

China Economic

Local Economic

Interest Rates

Rental LevelsCapital Value Levels

Yield Attractiveness

Short-term over-supply

Long-term over-supply

Jun-10

Jun-11

0

1

2

3

4

5

Risk Levels(12-mth Outlook)

Source: Jones Lang LaSalle estimates

Accelerating growth inrents and capital valuesacross all propertysectors in 1H11

Despite rising economicuncertainties, overallfundamentals remainedhealthy to support furthermarket growth, albeit at arelatively slower pace

Longer-term supply

pressure across the keyproperty sectors isrelieving as moregovernment land is put upfor auction/tender


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Grade A MarketOffice


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-0.2

0.3

0.8

1.3

Overall Central WC/CWB TST HK East Kln East

NFA,

sq

ft(million)

1Q 2011 2Q 2011

Sustained leasing demand entering into 2011, after experiencing

a record year in 2010

Net Take-Up by Submarket Annual Net Take-Up Overall Market

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011tillJune

NFA

,sq

ft(million)

Source: Jones Lang LaSalle


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01

2

3

4

5

6

7

8

9

Jan-

08

Apr-

08

Jul-

08

Oct-

08

Jan-

09

Apr-

09

Jul-

09

Oct-

09

Jan-

10

Apr-

10

Jul-

10

Oct-

10

Jan-

11

Apr-

11

Jul-

11

0

5

10

15

20

25

30

Central

Tsim Sha Tsui

Wanchai/Causeway BayOverall

Hong Kong East

Kowloon East

CentralWanchai/

Causeway BayHong Kong

EastTsimshatsui

KowloonEast

Overall

1H11 3.7% 2.3% 3.2% 3.1% 11.2% 4.8%

End-2010 3.0% 3.0% 3.7% 4.1% 10.8% 4.7%

Vacancy levels remained low across all submarkets


Vacancy (all other submarkets, %) Vacancy (Kowloon East, %)


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80

100

120

140

160

180

Jan-08

Apr-08

Jul-08

Oct-

08

Jan-09

Apr-09

Jul-09

Oct-

09

Jan-10

Apr-10

Jul-10

Oct-

10

Jan-11

Apr-11

Jul-11

RentalV

alueIndex(Jan2010=1

00)

Central Wanchai / Causeway BayHong Kong East TsimshatsuiKowloon East Overall

Rental Value 1Q11 2Q11 1H11

Central

9.2%

6.6%

16.4%

Wanchai/

Causeway Bay 7.9% 5.1% 13.4%

Hong Kong East 10.3% 7.1% 18.1%

Tsimshatsui

1.1%

7.5%

8.7%

Kowloon East 7.1% 4.3% 11.7%

Overall 8.1% 6.3% 15.0%

Grade A office rentals approaching peak levels



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60

80

100

120

140

160

180

Jan-0

8

Ap

r-08

Ju

l-08

Oc

t-08

Jan-0

9

Ap

r-09

Ju

l-09

Oc

t-09

Jan-1

0

Ap

r-10

Ju

l-10

Oc

t-10

Jan-1

1

Ap

r-11

Ju

l-11

CapitalValueIndex(Jan2010=10

0)

Central Wanchai / Causeway BayHong Kong East TsimshatsuiKowloon East Overall

Capital Value 1Q11 2Q11 1H11

Central 13.1% 9.1% 23.3 %

Wanchai/

Causeway Bay 13.0% 9.8% 24.1%

Hong Kong East 10.7% 4.3% 15.5%

Tsimshatsui 4.6% 5.5% 10.3 %

Kowloon East 10.1% 5.1% 15.8 %

Overall 11.8% 8.2% 21.0%

Accelerating capital value growth despite a low yield environment



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No rebound in short-to-medium term new supply


0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

2011 2012 2013 2014 2015

Central Wanchai / Causeway Bay

Kowloon East Other Decentralised Areas

Grade A Office Supply (sq ft, NFA)


10/32

Further rental growth is expected despite a relative slowdown

in growth momentum

0

1

2

34

5Global Economic

China Economic

Occupancy Costs

Other Operating CostsShort-term Space Availability

Long-term Space Availability

Tax Environment

Jun-10

Jun-11

0

1

2

3

4

5



Recent economicuncertainties may slowbusiness growth

momentum

Low space availability willprovide sustained supportto overall rentals, despite

potential pressure inbuildings with returningspaces

Longer-term supply

pressure is relieving asmore government land isput up for auction/tender


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Retail Property MarketRetail


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-10

-5

0

5

10

15

20

2530

35

40

Sep-09 N

ovJan

Mar

May Ju

l

Sep

Nov

Jan-11 M

ar

May

YoYGrowth(%)

T otal Retail Sales Value T otal Retail Sales Volume

Total Retail Sales

Source: Census & Statistics Department

-25

-15

-5

5

15

25

35

45

55

65

May-10

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan-11

Feb

Mar

Apr

May

Y

oY

Growth(%)

Long Haul Short Haul

Mainland Chinese Total T ourist Arrivals

Source: Hong Kong Tourism Board

Tourist Arrivals

Buoyant market fundamentals supporting rental growth


13/32

Source: Jones Lang LaSalle; market sources

Aggressive rental biddings by international retailers


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Rents / CVs 1Q11 2Q11 1H11

High Street Shop

Rents

4.6% 4.9% 9.7%

Overall Prime

Shopping Center

Rents

2.7% 2.8% 5.5%

Premium Prime

Shopping CenterRents

4.0% 3.8% 7.9%

High Street Shop

Capital Values 12.7% 7.7% 21.3%

70

80

90

100

110

120

130

140

150

160

170

180

Jan-08

Apr-08

Jul-08

Oct-

08

Jan-09

Apr-09

Jul-09

Oct-

09

Jan-10

Apr-10

Jul-10

Oct-

10

Jan-11

Apr-11

Jul-11

In

dex(Jan2010=100)

Overall High Street Shop Rents Overall Prime Shopping Centre RentsPremium Prime Shopping Centre Rents High St Shop CVs

Retail rents set new record highs in 1H11


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Same old story about tourism consumption remains valid

0

1

2

34

5Global Economic

China Economic

Tourism Market

Consumer Confidence

Rentals

Over-supply

Jun-10

Jun-11

0

1

2

3

4

5



Tourist consumptions toremain as a key driver forretail revenue growth

Local consumerconfidence is expected toremain generally strongdespite a marginal rise ineconomic uncertaintiesand inflationary pressure

Strengthened RMB toprovide continued

support on luxury goodsdemand despite rumorsabout potential luxury taxgoods tax in China


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Retail MarketWarehouse


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-14.9

-10.4

3.3

34.3

29.9

24.2

15.1

20.7

9.6

-12.9 -14.3

26.0

24.3

27.7

14.4

24.6

7.2

-2.0

-20

-10

0

10

20

30

40

2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 Apr-May

Y-o-Y

Growth(%)

Total Imports Total Exports

External trading sector posts slower growth

Source: Census & Statistics Department


18/32

3Q103Q10 4Q104Q10 1Q111Q11 2Q112Q11

Demand base continues to broaden



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80

90

100

110

120

130

Jan-0

8

Apr-0

8

Jul-0

8

Oct

-08

Jan-0

9

Apr-0

9

Jul-0

9

Oct

-09

Jan-1

0

Apr-1

0

Jul-1

0

Oct

-10

Jan-1

1

Apr-1

1

Jul-1

1

Index(Jan2010=100)

Rental Value Capital Value

1Q11 2Q11 1H11

Rental Values 4.2% 2.8% 7.1%


Both capital values and rental values on new record highs



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Further rental growth is expected despite some market

uncertainties

0

1

2

3

4

5Global Trade Market

China Trade Market

Local Retail MarketOver-supply

Rental Level

Jun-10

Jun-11

0

1

23

4

5



Recent rebound inJapanese industrialproduction numberspoints to a recovery in

external trade growth anddemand momentum

But prolonged slowgrowth in the US andrising uncertainties inEurope remained as keyconcerns

Tight vacancy and limitednew supply is expected toprovide further support torental growth


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Residential MarketResidential


22/32

0

2

4

6

8

10

12

14

16

18

Jan

-05

M

ay

-05

Sep

-05

Jan

-06

M

ay

-06

Sep

-06

Jan

-07

M

ay

-07

Sep

-07

Jan

-08

M

ay

-08

Sep

-08

Jan

-09

M

ay

-09

Sep

-09

Jan

-10

M

ay

-10

Sep

-10

Jan

-11

M

ay

-11

N

o.

ofS&P

Agreem

en

ts

('000)

< $1m $1-2m $2-3m $3-5m $5-10m > $10m

2009:9,600 /mth

2010:11,300 /mth

2008:8,000 /mth

2007:10,300 /mth

2006:6,900 /mth

2005:8,600 /mth

1H11:9,200 /mth

25%25% $3-5m49%49% $10m

1H11

A marked slowdown in sales volume after the austerity measures

Source: Land Registry


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0

200

400

600

800

1,000

1,200

20 - 30m 30 - 50m 50 - 100m >100m

No

.ofTransactions

2H09 1H10 2H10 1H11*

2011 YTD*

No. ofTransactions

TotalConsideration

$20-30m 687 $16.7 bil

$30-50m 371 $14.0 bil

$50-100m 131 $8.8 bil>$100m 71 $20.0 bil

0

5

10

15

20

25

30

20 - 30m 30 - 50m 50 - 100m >100m

TotalConsideration(HK$bil)

Similar direction on luxury residential sales market

Source: EPRC, Market Sources* Preliminary Figure


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Land Sale Record for the 2011/12 Financial Year

DisposalType

AwardDate

LocationPrice

(HKD mil)AV

(HKD)Purchaser

Tender Jun-11 Lee Kung Street, Hung Hom 801 7,640 Cheung Kong (Holdings)

Tender Jun-11 Junction of Gillies Avenue South& Bulkeley Street, Hung Hom 406.3 7,202 Hong Kong Ferry

Auction Jun-11Ping Kwai Road, Ping Shan,

Yuen Long300 4,587 Cheung Kong (Holdings)

Auction Jun-11 Borrett Road, Hong Kong 11,650 26,763 Cheung Kong (Holdings)

Auction May-11 Ngau Tam Mei, Yuen Long 662 6,548 Cheung Kong (Holdings)

Auction May-1162 Begonia Road, Kowloon

Tong579 15,742 China Overseas

Auction May-11Former Lingnan College Site,

Stubbs Road4,490 24,829 Sun Hung Kai Properties

Auction Apr-11 7 Ko Shan Road, Hung Hom 1,525 9,934 Nan Fung & Wing Tai

Source: Lands Department, Jones Lang LaSalle estimates

Residential sites soldso far in 2011,

fetching a total of

88

HKDHKD 20.4 bil20.4 bil

No. of units

from unsoldsites:15,200

No. of unitsfrom sold

sites:800

Active land sale market to ratify the supply shortage problem


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0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

2008

2009

2010

Jan-May2011

No.ofPrimarySales

Source: Land Registry, Market Sources

~90% sold~90% sold

Key launches in 1H11

~95% sold~95% sold

~90% sold~90% sold

100% sold100% sold

Limited new supply and softened sentiment combined to thin

primary sales volume in 1H11


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1Q11 2Q11 1H11Luxury Residential


Luxury Residential

Rental Values 2.3% 2.6% 4.9%

Mass ResidentialCapital Values 5.7% 4.2% 10.1%

60

70

80

90

100

110

120

130

140

150

Jan-

08

Jul-

08

Jan-

09

Jul-

09

Jan-

10

Jul-

10

Jan-

11

Jul-

11

Index(Jan2010=100)

Luxury Residential Capital Value Luxury Residential Rental Value

Mass Residential Capital Value

Further capital value growth despite a slowdown in sales volume



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Rising market risks but not at hazardous levels

0

1

2

3

4

5Global Economic

China Economic

Credit Availabilty

Interest Rate

Labour MarketPrice Level

Affordability

Over-supply

Govt. Policy

Jun-10

Jun-11

0

1

23

4

5



Low holding costsremained intact despitethe recent marginal rise in

effective mortgage rates

Transaction volume toremain at relatively lowlevels but prices should

be able to hold firm

With buyers holding backpurchase decisions,leasing demand isexpected to pick up,lending greater support torents


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Investment MarketInvestment


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0

10

20

30

40

50

60

7080

90

100

1H10 2H10 2010 1H11

Source: Jones Lang LaSalle; EPRC

Total Volume:123

Total Volume:174

Total Volume:297

Total Volume:159

Sustained investment demand despite higher prices and lower

yields

Total Considerations in HKD bil (property transactions > HKD 100 mil)


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Office,

$39.5, 42%

Residential,

$31.8, 34%

Retail,

$17.7, 19%

Industrial,

$4.2, 5%

Total Consideration by Sector HKD 100 mil transactions (HKD billion)

Office, 78,

26% Industrial,

16, 5%

Residential

, 122, 42%

Retail, 81,

27%

Total Volume by Sector HKD 100 mil transactions


Residential sector remained as the focus of the investment market

Retail, 48,

30%Residential

, 71, 45%

Industrial,

7, 4%

Office, 33,

21% Office,

$12.4, 29%

Residential,

$19.3, 46%

Industrial,

$0.9, 2%

Retail,

$10.0, 23%

2010

1H11

2010

1H11

Total :297 transactions

Total :HK$93.2 bil

Total :

159 transactions

Total :

HK$42.6 bil


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Sector Property Purchaser Considerations

Office

Honest Motors Building (en bloc) CITIC Pacific HKD 580 mil

Millennium City Phase 3 (10 floors) AEW HKD 510 mil

Skyline Commercial Centre (en bloc) Pamfleet HKD 387 mil

9 Queen's Road Central (whole floor) TBC HKD 382 mil

Retail

Nan Fung Plaza The Link REIT HKD 1.17 bil

Tropicana Garden Arcade JEBN Assets Management HKD 191.6 mil

The Pemberton Pioneer Global Group HKD 523 mil

Residential

No. 3 Deep Water Bay Road TBC HKD 888.8 mil

Arts Mansion Phoenix Property Investor HKD 1.84 bil

20-22 South Bay Road TBC HKD 880 mil

IndustrialEmperor International Square Central Source Ltd HKD 850 mil

Culturecom Centre Liu & Chen Ltd HKD 286 mil


Key investment transactions in 1H11 (> HKD 100 mil)


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Thank you

Documents

Hong Kong Mid Year Report 2011 JLL