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24 APR 2019

Hong Kong commercial property market recovers confidence in early 2019

The stagnation experienced across Hong Kong's commercial property market last year has eased, as confidence returns moving into 2019, according to the Hong Kong Commercial Property Monitor for the first quarter.

Growth on the Chinese mainland and a relaxation of trade-war fears are chief among the factors helping the market towards stability.

The report surveys experts in the city's sales and letting markets, who reported a substantial shift in market sentiment from negative to neutral forecasts. The Investment Sentiment Indices (ISI) — a measure of supply, demand and expectation — reported a jump to +3% in the first three months of 2019, from -13% in the last quarter of 2018, while the Occupier Sentiment Indices (OSI) recorded a similar increase from -18% to -1%.

Together these figures represent a relieving moment of stability following a turbulent period of market scepticism. This stabilization comes as a number of external risks have been mediated, the report notes, identifying three key factors: steps taken by the Chinese government to support mainland growth, as well as a period of cooling in the US-China trade war, while global interest rate cycles have been put on hold.

Survey respondents continue to signal a 'soft landing' for most commercial property markets. The market appears to be preparing for a period of below-trend, but generally positive, growth in capital values and rents, rather than a sharp contraction. However, the outlook is still clouded by uncertainties surrounding trade and other macroeconomic risks.

Sean Ellison, Senior Economist, Asia Pacific, RICS

Yet looking ahead professionals reported no increase in commercial occupier demand — following a marked pullback in the final quarter of 2018 — despite an increase in both rental and landlord supply. Meanwhile experts forecast a modest rental growth of +1.6% across the commercial sector over the next 12 months, while capital values are expected to increase by 2.2% in the same period.

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