Source: Media Outreach
HONG KONG SAR – Media OutReach – 14 December 2021 – Global real estate services firm Cushman & Wakefield announced the Hong Kong and Greater Bay Area (GBA) Property Market 2021 Review and 2022 Outlook today. With the pandemic being gradually contained and a steady economic recovery in 2021, Hong Kong’s property market shows signs of recovery:
– The residential market has been active as the number of sale and purchase agreements (S&P) reached a peak since 2012. Private home prices show a significant rise with some housing estates breaking record highs.
– The number of major investment transactions increased by more than double on the previous year, with industrial buildings and development sites among the most active sectors.
– The office leasing market has stabilized, with total absorption in 2H21 standing at 513,000 sf NFA and rental declines slowing.
– The retail leasing market has begun to pick up, as vacancy in prime retail districts begins to drop and rents in some districts start to rise.
– In the GBA, Shenzhen and Guangzhou continue to dominate major investment deals and residential transactions, with other GBA cities catching up. Foreign investors’ presence has also grown, up to a 49% share in 2021.
Data source: Cushman & Wakefield Research
Chart 1: Number of Residential Sale & Purchase Agreements
Chart 2: Major investment transaction volume by HK$ Bn (2012-2021)
Chart 3: Rental change in Grade A offices by district in Hong Kong
Chart 4: Retail rents in prime districts in Hong Kong
Chart 5: Commercial property and investment deals in GBA
Hong Kong residential market: total S&Ps in 2021 reached a 9-year peak; overall home prices rose by 6.5%, with an increment of around 5-10% expected for 2022
The residential market was active in 2021, with more than 6,000 monthly S&Ps for six consecutive months for the period from February to July, 2021. Despite a decline in S&P cases since August 2021, the average number stood firmly at around 5,000 transactions a month. Total annual transactions are expected to reach 74,600 units, a new high since 2012. The secondary market has been particularly active, with more than 57,000 transactions this year, another new high since 2012.
Prevailing low interest rates and strong demand from end-users have gradually pushed overall home prices up since the beginning of 2021, peaking in August and September this year, after which prices fell slightly. Overall home prices are estimated to rise by around 6.5% by the end of 2021. Cushman & Wakefield’s home price tracker showed that prices at mass housing estates, such as City One Shatin, surpassed the prior peak of June 2019 in September this year, with a record high of HK$19,800 psf, and are now expected to slightly decline to HK$19,200 psf by the end of 2021. Prices at mid-market housing estates, such as Taikoo Shing, and luxury homes, such as Residence Bel-Air, are also approaching historical highs. Taikoo Shing is within 9.3% of its prior peak of June 2019, while Residence Bel-Air is now just 4.2% short of the 2019 peak.
Cushman & Wakefield’s Director and Head of Research, Hong Kong, Keith Chan, commented: “The residential market has been active in 2021, with transaction volumes reaching a 9-year high. As property prices have gradually approached their historical highs, transaction and price growth slightly slowed in 2H21. We expect that the residential market will continue to prosper in 2022. There will likely be around 18,500 private units available in the market, with no surprise in supply anticipated. The high base number of 2021, combined with a shrinking stock of small-value units, will likely diminish the 2022 transaction volume by around 10% y-o-y. However, an improved economic environment will likely drive a further rise in home prices. We anticipate home prices to climb by around 5% to 10% next year. Luxury homes in urban areas will likely benefit more.”
Major investment transactions: deal count and total transactions both reach new peaks since 2019
Major investment transactions in 2021 (each with a consideration of over HK$100 million) were mainly driven by local investors and foreign funds. A total of 180 transactions were anticipated in 2021, more than double that of last year. The total annual transaction volume for 2021 is now estimated to reach HK$80 billion, a jump of 67% y-o-y. Industrial properties and development sites were among the most well-sought after assets, each taking a share of approximately 30% of the total volume. The popularity of industrial properties amongst institutional investors is due both to their relatively small consideration and their flexibility to convert to alternative uses, such as self-storage facilities or data centers. Due to the continued impact of social unrest and the COVID-19 pandemic in the past two years, demand for office and retail space shrank, weakening investment demand. The office sector’s share of total transactions dropped significantly to 15% in 2021, compared to 62% in 2020.
Cushman & Wakefield’s Executive Director and Head of Capital Markets, Hong Kong, Tom Ko, pointed out: “We anticipate that the total major transaction volume in 2022 will surpass 2021, reaching a total of 200 deals and HK$100 billion. Demand for industrial buildings in 2021 was at a historic high, and we expect this to continue in 2022. Investors worldwide have recently been drawn to emerging multi-family conversions, such as serviced apartments and hotel properties. The aforementioned asset classes will likely benefit from the revival of tourism activities when the border gradually reopens. The proposed lowered threshold for compulsory sales will likely trigger more development site transactions in 2022. To sum up, we expect industrial buildings, residential development sites, and multi-family conversions to become the three key pillars of the investment market in 2022.”
Grade A office market: positive absorption in two consecutive quarters, rental decline softened
The performance of the Grade A office market has recovered from its sluggish state in 1H21 for two consecutive quarters. Absorption for 4Q21 stands at 185,500 sf NFA, despite a total net absorption of negative 578,700 sf NFA recorded in 2021. This is also a major improvement from the negative 2.3 million sf NFA recorded in 2020. The banking and finance sector, and insurance industry, dominated new leasing transactions, with a total share of 42%. Overall rents on average have fallen by 4.7% in 2021, at a much slower pace than the negative 19.3% seen in last year. The improved economic environment and positive absorption performance in 2H21 have brought availability down by 80 bps to 13.6% in 4Q21, compared to 14.4% in 2Q21.
Surrender stock has been slashed from the peak of 724,000 sf NFA in 1Q21 to 367,000 sf NFA in 4Q21, a reduction of 49.3% from its peak.
Cushman & Wakefield’s Executive Director, Head of Office Services, Hong Kong, Keith Hemshall, mentioned: “With the completion in 2022 of over 2 million sf of new grade A office space in Two Taikoo Place in Hong Kong East, 98 How Ming Street in Kowloon East, and Airside atop Kai Tak MTR Station, we expect overall availability to increase to 16% to 17% by the end of the year and accordingly, for average rents to drop by 1% to 3%. That said, we expect that anticipated border re-opening will drive an improvement in the economy and the demand for office space will increase with an estimated net take up of 300,000 – 500,000 NFA for 2022. We expect Banking & Finance, Insurance and Business Centre / Co-working to continue to be active.”
Retail market: vacancy dropped across the board; rental levels have bottomed out
Retail sales growth in the jewellery & watches and fashion & accessories sectors (Jan-Oct 2021) has remained the strongest in 2021, with a y-o-y increment of 29.2% and 22.9%, respectively. Total sales in the retail industry in 2021 rose to HK$288.9 billion, a y-o-y increase of 8.5%. Retail rents in core districts have bottomed out beginning from 2H21. Increased local consumption has driven recovery of F&B rents in the range of 2.2% to 2.8% y-o-y from their bottom. The y-o-y vacancy rates in prime districts have fallen, especially in Causeway Bay and Tsimshatsui, to 7.9% (negative 520 basis points) and 13.1% (negative 480 basis points) respectively, with many new short-term leases evident.
Cushman & Wakefield’s Executive Director, Head of Retail Services, Hong Kong, Kevin Lam, mentioned: “With Hong Kong bringing the pandemic under control, the domestic economy gradually recovering, and the employment rate picking up, we anticipate an improvement in the consumer market in 2022. We believe retail rents have bottomed out and vacancy will decline further. Overall high-street rents will likely recover further in 1H22 at a range of between 2% and 5%, with Central district expecting to reach to as much as 5% to 8%. The reopening of the border will help bring tourists back, boosting major brands for their expansion plans next year. Central is expected to lead the recovery, followed by Tsimshatsui and Causeway Bay. However, a net population outflow is expected at the initial stage of the border reopening, bringing short-term pressure on retail sales, and particularly impacting F&B businesses during weekends. Accordingly, the return of tourists and their related consumption activities will drive recovery in the longer-term. The wellness and athleisure trends we saw driven by the pandemic are expected to continue in 2022.”
GBA: Shenzhen and Guangzhou still dominate, but other GBA cities will catch up in 2022
Most of the commercial property investment deals realised in the GBA in 2021 were still centred on Shenzhen and Guangzhou, together taking 98% of total transactions. The annual transaction volume is expected to reach RMB60 billion, a rise of 9% y-o-y, and also the second highest by total volume in the last five years (2017–2021). This demonstrates a highly active market, despite a smaller average deal size than before. Most transactions were low in value.
In terms of property types, non-traditional asset classes such as industrial / logistics and data centers continue to remain attractive. However, data center assets are limited by the available supply, and accounted for about 1% of total transactions. Meanwhile, neighbourhood malls are expected to be emerging investment targets. These three areas are expected to become the mainstream investment classes into the future.
Cushman & Wakefield’s Executive Director, Capital Markets, Greater China, Queeny So, commented: “We expect the total GBA investment volume in 2022 will be about the same as 2021, with its investment market continuing to mature. Investment opportunities are gradually expanding to other cities beyond Shenzhen and Guangzhou, with further investment activities expected. More foreign investors are now exploring investment into the region, with 49% of the total investment volume in 2021 coming from foreign capital, compared to 17% in 2020.”
In the GBA’s residential sector, the total number of transacted units in the first 10 months of 2021 fell by approximately 5.7% compared to 2020 on a like-for-like basis, with Huizhou and Dongguan dropping the most, down 32.8% and 25.5%, respectively.
Cushman & Wakefield’s Vice President, Greater China, Head of Consulting, Greater China, Alva To, concluded: “Homes in Shenzhen and Guangzhou remain the most expensive amongst the mainland GBA cities, although Foshan, Dongguan and Zhongshan are catching up with double-digit growth increases. Meanwhile, the residential market is likely to remain stable, although concerns over future government policies remain.”
Please click here to download photos.
Photo 1
Photo 1 Caption:Spokespersons of Cushman & Wakefield announced the Hong Kong and Greater Bay Area (GBA) property market 2021 review and 2022 outlook today.
The issuer is solely responsible for the content of this announcement. – Published and distributed with permission of Media-Outreach.com.
