Hong Kong’s real estate market went from red hot to frostbitten between June and October, with purchases of property assets in the city dropping by as much as 65 percent from the previous quarter in some market sectors.
Real estate transactions in Asia’s priciest city fell to HK$16.33 billion ($2.08 billion) in the third quarter, down 65.8 percent from the three months which ended on June 30th, and off more than 50 percent compared to the same period last year, according to a report released this week by property consultancy Cushman & Wakefield. The total investment amount was the lowest recorded in the city in two years.
With concerns over a US-China trade war and rising interest rates combining to hit the market from both sides, Hong Kong saw its first dip in home prices in 29 months during August, with rising uncertainty making it easy for investors in the world’s most expensive real estate market to keep their cash in their pockets.
Office Deals Drop by 76%
Investments in Hong Kong’s office assets led the market down during the period from July through September, with only HK$6.03 billion ($2.05 billion) worth of offices changing hands during the period – around one fifth of the previous quarter’s total of HK$36.03 billion.
“A lack of sizable en-bloc office transactions valued at above HK$100 million each this quarter dampened the total investment consideration in Hong Kong,” the agency noted in its report. Among the few deals getting done was Henderson Land and Lai Sun’s sale of their joint venture project, 8 Observatory Road, in Kowloon to a consortium of local investors for HK$4.1 billion ($522 million) in early July.
The agency noted a parallel downturn in the market for strata-title office units, with the few deals still getting done concentrated around the Greater Central submarket in the city’s traditional core business district.
Office properties made up some 37 percent of the value of all properties bought or sold during the period, dropping from 76 percent of the total transaction in the second quarter.
Retail Heads South While Sheds Keep Selling
Transactions of retail properties are also becoming less frequent in Hong Kong, with a report by Midland Realty indicating that the value of shops and mall space sold in the city during September declined 58 percent to HK$2.64 billion from the HK$6.37 billion recorded during August.
The quantity of retail property transactions was also down last month, falling from 151 deals in August to 96 in September, according to Midland’s figures.
The Cushman reported highlighted a surge in industrial deals as a highlight of the past quarter, with the three month total of HK$6.71 billion outpacing the five year average for the sub-sector by 89 percent.
Housing Continues to Slide
More recent data for the city shows Hong Kong’s housing market continuing to slow down after prices dropped for the first time in August.
Registrations of sales of second-hand properties totalled just 1,510 during the first three weeks of October, according to the city’s Lands Department, down by over 21 percent from the 1,920 deals registered during the same period in September.
In a market report Richard Lee, CEO of local agency Hong Kong Property said that his firm expects that the number of second-hand property deals registered for the whole month of October will fall to around 2,000 transactions, and predicted that deal volumes will continue to fall for another five months.
In its outlook for the coming months, Cushman & Wakefield’s analysts predicted that, “Ongoing trade tensions will likely push more investors to the sidelines amid rising uncertainties.” However, the agency ventured that after an unusally active first six months of 2018, and absent a worsening in trade tensions or other external factors, transactions for the full year of 2018 are likely to meet or surpass 2017’s record totals.