hong kong residential colliers international | HonG KonG ... Kong-Resid… · the residential market witnessed boosted buying sentiment and increased sales activities in 1Q 2012

c o ll i e r s i n t e r n at i o n a l | H o n G Ko n G

www.colliers.com/hongkong

hong kong residentialmarket

research & forecast report

1Q 2012 | Residential

market indicators forecast

overall performance

new supply

tenant demand

incentives

rents

capital values

yields

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

�

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

�

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

�

��

��

��

��

��

��

��

��

��

��

Source: The Land Registry, HKSAR GovernmentNote: 3-month Ending

pent-up demand the residential market witnessed boosted buying sentiment and increased sales activities in 1Q 2012. Pent-up buying demand for residential units, accumulated over the past six months as prospective buyers adopted a wait-and-see attitude in view of government measures to curb speculation and the uncertain global economic outlook, has been released onto the market, causing transaction volume to experience an upsurge in 1Q 2012.

leasing demand continued to change leasing demand remained weak during the quarter owing to seasonal factors. demand for large luxury flats with monthly rent of over hk$80,000 was particularly affected by the downsizing activities and housing budget cuts of the financial institutions, and landlords were more flexible in asking rents. however, leasing demand from non-financial sectors will remain strong in the near term.

external factors remain a key concernWith the pent-up demand in the residential market being gradually satisfied, the market will become quiet again. the future movement of the residential market will depend largely on external factors such as the resolution of the european sovereign debt crisis and the quantitative easing of policies by central banks.

no crash on Price

p. 2 | colliers international

hong kong | 1q 2012 | Residential

Source: HSBC

��

��

��

��

��

��

��

��

��

��

��

��

��

� �

��

��

sales Marketas the market is expecting another round of quantitative easing measures from the european Union and the Usa, with the capital shortage in mainland China being slightly eased following another 50 basis points (bps) bank reserve ratio cut in February, the hang seng index has been moving upwards since december 2011. however, with China lowering its gdP growth target for the first time in eight years from 8 to 7.5%, investor sentiment was once again dampened and the stock market slumped in the beginning of march.

the overall residential market was rather quiet before the lunar new Year due to seasonal effects. according to the land registry, the total number of sales and purchase agreements of residential units fell to 3,507 and 3,884 in January and February 2012 respectively, near the bottom level during the financial tsunami period - 3,264 transactions in november 2008. the mass residential market did experience an upsurge in the number of transactions after the lunar new Year. in march 2012, a total of 11,358 residential building unit transactions were recorded.

relaxed mortgage offeringseeing a decreased demand for business loans and the need to achieve a new mortgage loan target in 2012, banks in hong kong are getting more competitive on the mortgage battlefield. While a number of banks have announced that they will trim their mortgage rates, the hong kong monetary authority (hkma) has advised against offering mortgages at rates lower than hkma’s reference mortgage rates for banks. in fact, banks were more generous in offering more attractive terms and appraised values during the mortgage negotiation process.

the mortgage rate offered by hsBC with reference to the best lending rate (P) remained at P minus 2.1% - 2.4%, while hsBC’s existing best lending rate is 5%. however, the bank is willing to offer individual clients a mortgage rate down to P minus 2.85%.


colliers international | p. 3

��

��

��

�

��

��

��

�

��

��

��

�

��

��

��

�

��

��

��

�

��

��

��

�

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

�

��

��

��

�

��

��

�

��

��

��

��

��

��

��

��

��

��

��

Source: Colliers

Source: Colliers

luxury residential prices (By suB-markets)

district 2Q 10 3Q 10 4Q 10 1Q 10 2Q 11 3Q 11 4Q 11 1Q 12 1Q 12 (% QoQ)

the Peak 26,875 28,050 29,313 30,938 32,413 33,063 32,413 31,750 -2.0

mid-levels 11,803 12,000 12,725 13,188 13,663 13,838 13,238 12,995 -1.8

south side 17,713 18,613 19,288 19,538 19,925 19,725 19,250 18,470 -4.1

Overall 16,783 17,391 18,189 18,806 19,520 19,629 19,149 18,730 -2.2

(hk$ / sq ft)

upsurge in mass market driven By occupational demandafter the government’s implementation of ssd and the lowering of ltV ratio required by hkma last year, the residential market began to cool down and the number of residential transactions dropped significantly. as demand for residential units grew, coupled with banks’ more relaxed attitude in mortgage loans at the beginning of 2012, the mass residential market became more active again after the lunar new Year. small and medium residential flats with less aggressive asking prices were the most sought-after, and both home buyers and sellers seemed more willing to negotiate to facilitate the sales transactions.

luxury residential prices continued to declineUnlike the heated mass residential market, average luxury residential prices continued to decline, down 2.19% QoQ to hk$18,730 per sq ft during the three-month period ending February 2012. among the three traditional luxury districts, the south side witnessed the greatest drop, falling 4.05% QoQ to hk$18,470 per sq ft owing to the maximum ltV ratio requirement that allows up to 50% to properties valued at or above hk$10 million. although luxury residential units on the Peak were also affected, the impact was relatively small due to the very limited supply of stock. meanwhile, most of the transactions concluded during the quarter were valued between hk$25 and hk$60 million.



Source: Colliers

major residential sales transactions

month propertygfa

(sq ft)price

(hk$ m)unit price

(hk$ / sq ft)

the peak

Jan-12 guildford Court, Blk a, g/F Flat 1 2,700 85.20 31,556

Jan-12 Yue hei Yuen, house e 4,000 220.00 55,000

sOuth side

Feb-12 Villa Bel-air, house 07 9,254 295.00 31,878

Feb-12 regalia Bay, house a06 4,212 62.29 14,789

Jan-12 manderly garden, house 40 3,594 118.00 32,832

Jan-12 45 island road, house 6 2,705 80.00 29,575

dec-11 manderly garden, house 29 3,504 120.00 34,247

dec-11 33 island road, house 5 6,079 300.00 49,350

dec-11 redhill Peninsula, Cedar drive, house 53 2,880 56.00 19,444

mid-levels

Feb-12 regence royale, tower 1, 21/F Flat B 2,566 54.00 21,044

Feb-12 may tower 1, 11/F, Flat 3 2,850 59.50 20,877

Jan-12 hong Villa, 20/F 3,833 91.00 23,741

Jan-12 Chung tak mansion, 17/F 2,864 68.00 23,743

dec-11 31 robinson road, 29/F, Flat a 2,665 52.00 19,512

dec-11 trafalgar Court, 17/F, Flat a 3,008 57.50 19,116



(hk$ / sq ft / month)

leasing Demanddemand from financial sector remains weak in the leasing market, demand remained weak in 1Q 2012 owing to the falling number of expatriate arrivals around the Chinese new Year period, especially the demand for luxury residential units with monthly rents of hk$80,000 and above. demand coming from the financial sector remained weak as some financial institutions continued to downsize their operations in hong kong or cut housing allowances for staff at all levels. nevertheless, there were more leasing enquiries from non-financial firms. in fact, the housing budget for some non-financial firms is even higher than that for financial institutions. as to location, some newly-arrived expatriates from financial companies may choose to stay in West kowloon for lower rents instead of the three traditional luxury residential districts on the island.

major residential lease transactions

month property district gfa(sq ft)

rental(hk$ / month)

unit rental(hk$ / sq ft /

month)Feb-12 29 severn road the Peak 2,300 140,000 60.87

dec-11 127 repulse Bay road south side 3,008 150,000 49.87

Jan-12 the repulse Bay south side 2,925 144,000 49.23

Jan-12 Bel-air on the Peak south side 2,555 108,000 42.27

Jan-12 royal Bay south side 4,688 200,000 42.66

dec-11 dynasty Court mid-levels 2,691 160,000 59.46

dec-11 the harbourview mid-levels 2,350 145,000 61.70

Feb-12 the royal Court mid-levels 2,846 103,000 36.19

Feb-12 seymour mid-levels 1,888 100,000 52.97

Source: Colliers

small serviced apartment units in demand in 1Q 2012, the market saw strong demand for studios and one-bedroom suites of between 500 to 900 sq ft. larger units, on the other hand, showed higher vacancy rates due to downsizing by tenants in view of lower housing budgets and less family relocation in 1Q 2012.

as of the end of 1Q 2012 , budgets for staff at junior levels ranged from hk$20,000 to 40,000 per month, middle management levels from hk$40,000 to 130,000 per month, and senior executives from hk$130,000 and above per month.



��

��

��

�

��

��

��

�

��

��

��

�

��

��

��

�

��

��

��

�

��

��

��

�

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

�

��

��

��

�

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

Source: Colliers

Source: Colliers

luxury residential rentals (By suB-markets)

district 2Q 10 3Q 10 4Q 10 1Q 11 2Q 11 3Q 11 4Q 11 1Q 12 1Q 12 (% QoQ)

the Peak 52.15 54.31 56.96 60.88 66.55 68.56 66.70 63.73 -4.5mid-levels 39.97 41.90 43.20 44.97 45.79 46.88 44.69 44.02 -1.5south side 42.29 44.18 45.32 46.55 48.48 49.31 47.96 45.40 -5.3Overall 40.93 42.60 43.83 45.42 47.30 48.37 46.77 45.26 -3.2

(hk$ / sq ft / month)

rent trend moving downwardsas the demand for residential premises with monthly rents of hk$80,000 and above became weaker, luxury residential rents in south side and the Peak dropped 5.3% and 4.5% respectively during the three-month period ending February 2012 to hk$45.40 and 63.73 per sq ft per month. the smaller decline on the Peak was largely due to the extremely tight supply of leasing stock.landlords, especially those with larger and more expensive premises, were more willing to give concessions during the negotiation process. some landlords were even willing to renew the tenancy at the rent set two years ago, indicating a rather cautious attitude towards future rent movement. From december 2011 to February 2012, overall luxury rent for the three traditional residential districts was hk$45.26 per sq ft per month, down 3.2% QoQ.

looking ahead, as more expatriates are expected to come to hong kong in 2Q 2012, partly due to expatriate families anticipating the start of the school year, the leasing market is expected to be more active again.



Source: Colliers

��

��

��

�

��

��

��

�

��

��

��

�

��

��

��

�

��

��

��

�

��

��

��

�

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

�

��

��

��

�

��

��

��

��

��

��

��

��

��

��

��

��

investment Market

the overall luxury residential yield compressed marginally from 2.75% in november 2011 to 2.72% in February 2012 as luxury rents fell at a faster pace than capital values. the gloomy sentiment and substantial amount of capital required under the maximum ltV ratio made real estate investment less attractive than before, causing the number of investment transactions to decline during the quarter.

developers remain cautious in land salessince december 2011, the government has successfully sold five residential sites through public tender. two connected plots on lantau island were sold to swire Properties in december 2011 and a tseung kwan o site was sold to Wheelock Properties in January 2012, both at a price close to the low end of market estimates.

in February 2012, a large residential site with a buildable gFa of 939,600 sq ft in tuen mun was granted to kerry Properties for hk$2,739 million through public tender. it is expected to be developed into over 1,100 flats upon completion. the sales price was close to the low end of market estimates. to the surprise of the market, a small plot of land in Peng Chau was sold to sino land for only hk$19 million, representing an accommodation value of hk$516 per sq ft, the lowest in the past 10 years.

in march 2012, however, a residential site in ap lei Chau was sold by public tender to China overseas at a price above the market expectation at hk$2,538 million. meanwhile, another small plot of land was sold to a party related to mainland developer agile Property at a record high price of hk$21,350 per buildable sq ft for a residential site in the new territories. the land sale results during the quarter indicated that local developers are rather cautious given the economic uncertainties and plentiful land sales by the government in the future.



tender result By mass transit railway corporation

date locationmaximum

gfa(sq ft)

lump sum (hk$ m)

accommodation value

(hk$/sq ft)purchaser

12 Jan 2012 tsuen Wan 5 (Cityside) project at West rail’s tsuen Wan West station

832,315 2,600 3,129 Chinachem

12 Jan 2012 tsuen Wan 5 (Bayside) project at West rail’s tsuen Wan West station

2,235,145 Withdrawn - -

Source: Lands Department, HKSAR Government

government land sale results 1Q 2012 – residential sites

date lot no. locationmaximum

gfa(sq ft)

lump sum (hk$ m)

accommodation value

(hk$/sq ft)purchaser

auction or

tender

8 dec 2011 lot 724 in dd 332 Cheung sha site 406 31,904 176.8 5,542 swire Properties tender

8 dec 2011 lot 726 in dd 332 Cheung sha site 407 21,507 180.0 5,537 swire Properties tender

12 Jan 2012 tkotl 119 area 66B2, tseung kwan o 488,180 1,860.0 3,810 Wheelock Properties tender

9 Feb 2012 tmtl 423 area 48, Castle Peak road, so kwun Wat, tuen mun

939,600 2,379.0 2,915 kerry Properties tender

1 mar 2012 lot no. 676 in dd Peng Chau

Peng lei road, Peng Chau 36,845 19.0 516 sino land tender

22 mar 2012

aplil 135 at Junction of ap lei Chau drive and ap lei Chau Praya road

262,640 2,538.0 11,044 China overseas holdings

tender

22 mar 2012

lot 1588 in dd 243 Pik sha road, sai kung, new territories

32,787 700.0 21,350 Party related to agile Property holdings

tender

total: about 2,000 units / 1,813,463 sq ft / hk$7,852.8 million

Source: : MTRC

six sites to Be offered for tenderthe government continued to show its determination to maintain a stable residential supply. in 2Q 2012, the government will offer four residential sites for sale by public tender. among the four sites, three are low-density sites located in repulse Bay, tuen mun and shatin. one larger parcel of residential land with quantity limits located in tseung kwan o will be launched for tender offers during the quarter to provide 310 to 326 flats. the four sites are expected to provide about 400 residential units in total.

in addition to the four residential sites, a site in shouson hill and a site in Peng Chau had been successfully triggered for public tender under the application list system. the minimum guaranteed bid of the sites are hk$3,598 million and hk$5.5 million, respectively.

meanwhile, the mass transit railway Corporation (mtrC) also announced in march 2012 that the company will offer five residential development sites above mtr stations for tendering, including tai Wai, long Ping north, long Ping south and tin shui Wai. the tsuen Wan 5 (Bayside) project that was withdrawn in January 2012 due to dissatisfactory tender offers will be re-launched in the second half of 2012.



Source: Lands Department, HKSAR Government

residential sites to Be offered for government tenders in 1Q 2012

site lot no.gfa

(sq ft)

estimated market value

(hk$ m)

estimated accommodation

value (hk$/sq ft)

tender invitation

date

tender closes

kwun Fat street, siu lam, tuen mun tmtl 436 38,837 117 - 300 3,000 - 7,700 23 mar 2012 27 apr 2012

near 110 repulse Bay road rBl 1165 41,172 1,050 - 2,059 25,000 - 50,000 23 mar 2012 27 apr 2012

area 56a, kau to, sha tin, new territories sttl 562 50,376 300 - 403 6,000 - 8,000 13 apr 2012 18 may 2012

area 66C1, tseung kwan o, new territories

tkotl 114 257,652 979 - 1,031 3,800 - 4,000 13 apr 2012 18 may 2012

8-12 deep Water Bay drive, shouson hill

rBl 1190 248,135 $4,460 - $7,440 $17,974 - $30,000 27 apr 2012 25 may 2012

tung Wan, Ping Chau (site a) lot 673 in dd Peng Chau

9,223 $6.5 - $9.2 $705 - $1,000 27 apr 2012 25 may 2012

total: 645,395 sq ft



projected new supply of luxury residential units in 2012

development house* apartment* developer / ownerno. of units

status

the peak

35, 37, 39 severn road, 42 Plantation road 3 @ 2-s,

4 @ 3-s

- shkP 7 Completed

12 mount kellett road 12 @ 3-s - shkP 12 Under Construction

28 Barker road 7 @ 3-s - hutchison Whampoa limited 7 Under Construction

1 gough hill road 3 @ 3-s - lucky Beat investment ltd 3 Under Construction

72 mount kellett road 3 @ 2-s - sea holdings limited 3 Under Construction

sOuth side

9 shouson hill road 31 @ 3-s - shkP 31 Completed

21 tai tam road - 1 @ 9-s newman investment Co ltd 14 Completed

48-50 stanley Village road 12 @ 3-s - shkP 12 Under Construction

4 shek o headland road 4 @ 3-s - Century sino international ltd 4 Under Construction

20 repulse Bay road 1 @ 4-s - lavender rose ltd. 1 Under Construction

60-62 Chung hom kok road - 1 @ 4-s supreme Faith ltd 6 Under Construction

12 stanley mound road 2 @ 3-s - newtown investment Co ltd 2 Under Construction

18 Carmel road 1 @ 4-s - horizon east investment ltd 1 Under Construction

mid-levels

38-44 Caine road - 1 @ 31-s Fine mean ltd 106 Under Construction

10 Bowen road 1 @ 4-s - tyronie ltd 1 Under Construction

4,4a,6,6a Castle steps, 2a-e seymour road,

23,25,27,29 Castle road

- 1 @ 44-s swire Properties 126 Under Construction

16-18 Bonham road - 1 @ 30-s Queen Cheers development ltd 12 Under Construction

* No. of block @ No. of storey Source: Colliers

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

�

��

�

��

�

�

��

��

��

��

��

��

��

��

��

��

��

�

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

�

��

�

��

�

��

��

��

Source: Colliers

supply

although there will be increasing supply in the mass residential market, luxury residential supply will remain tight over the next three years at an average of 281 units per year in the three traditional luxury residential districts. south side is expected to see the most limited supply of 84 units in total over the next three years, while the tight situation in the mid-levels is expected to be eased.



��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

�

��

�

��

�

��

��

��

�

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

�

��

�

��

�

�

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

�

��

�

��

�

��

��

��

�

��

��

��

��

��

��

��

��

��

��

��

Source: Colliers

Source: Colliers

Source: Colliers

colliers international (hong kong) limited

suite 5701 Central Plaza18 harbour road Wanchaihong kongtel +852 2828 9888fax +852 2828 9899Company licence no: C-006052

simon loexecutive director | research & advisory | asiatel +852 2822 0511fax +852 2868 5275email [email protected]

522 offices in 62 countries on 6 continentsUnited states: 147Canada: 37latin america: 19asia Pacific: 201emea: 118

• $1.8 billion in annual revenue in 2011

• 1,250 million square feet under management

• over 12,300 professionals

Copyright © 2012 Colliers international.

the information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. no responsibility is assumed for any inaccuracies. readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.


richard kirkemanaging director | hong kongtel +852 2822 0699fax +852 2107 6047email [email protected] licence: e-279867

You are receiving this collateral because you either subscribed for it or expressed your interest to receive it at some point to Colliers international. if you do not wish to receive future communications from us, please contact Colliers international by email at [email protected] with your name and item to unsubscribe

www.colliers.com

accelerating success.

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

�

��

��

��

��

��

��

��

��

��

��

��

��

��

��

Source: Colliers

Market outlooklooking ahead, the european sovereign debt crisis remains the top concern for the future market movement and the slowing down of China’s economic growth will also dampen investor sentiment. however, the residential market may be injected with optimism as China slowly increases its monetary supply and banks adopt a more relaxed attitude towards mortgage applications. although the market has witnessed a minor upsurge in sales transactions in 1Q 2012, its sustainability remains questionable. as the global financial market outlook remains highly uncertain, landlords of luxury residential properties may soften their attitude and become less aggressive in asking prices to facilitate transactions. therefore, the capital value of luxury residential properties is expected to decrease by 13% over the next 12 months.

traditionally, the second quarter of the year is an active period in the leasing market, thus the number of leasing transactions is expected to increase but the rents are expected to retain their downtrend and fall 6% over the next 12 months.

Documents

hong kong residential colliers international | HonG KonG ... Kong-Resid… · the residential market witnessed boosted buying sentiment and increased sales activities in 1Q 2012