Knight Frank released the Greater China Q4 2015 Report which looks at the Grade-A office, luxury residential and prime retail property markets in Beijing, Shanghai, Guangzhou, Hong Kong and Taipei. Despite troubling by internal and external factors, including a slowdown in imports and exports, volatility in the stock market and an interest-rate hike in the US, real estate markets in major Greater China cities remained generally stable in Q4 of 2015.
In Q4 2015, the en-bloc office sales market performed remarkably well in major Greater China cities, with investors optimistic about the market outlook. Policies such as Shanghai-Hong Kong Stock Connect and Mutual Recognition of Funds attracted Mainland enterprises to Hong Kong. With a supply shortage in core business areas, where office rents rose notably and vacancy rates continued to decrease in Hong Kong.
Looking ahead in 2016, with abundant supply, rents in Beijing, Guangzhou and Shanghai are expected to decline or grow slowly. Hong Kong’s office market will be polarised, with rents in core areas rising due to a continued shortage of supply and those in non-core areas declining amid abundant supply.
Benefiting from favourable measures introduced by the Chinese government, luxury home prices and rents continued to rise in Beijing, Shanghai and Guangzhou in Q4 2015. In Hong Kong, residential sales volume decreased in 2015 with the market expecting a US interest-rate rise and an increase in future supply.
In 2016, oversupply will continue to affect the Mainland property market, making inventory clearance a major target. Modest interest-rate hikes in the US are expected to have little impact on the Hong Kong market, though home prices will drop 5-10% this year with increasing upcoming supply.
During Q4, the prime retail market remained stable in the Mainland’s first-tier cities, with both rents and prices recording minor ups or downs. The strong Hong Kong dollar made visiting Hong Kong expensive, resulting in a decline in the number of arrivals. In addition, China’s anti-corruption policy resulted in reduced demand for luxury goods from Mainland Chinese visitors. This led to luxury brands’ consolidating their shop networks, resulting in a downward adjustment in prime retail rents and enabling many mid-range retailers to move into prime locations.
In the coming year, shopping centre supply will remain abundant on the Mainland. In Hong Kong, retail sales will remain weak. Prime retail rents will face downward pressure.