Colliers International announced their property forecasts for the next 12 months. The international property consultant remarked that Hong Kong’s property sectors have sustained continued growth in the first half of 2007 and for the latter part of the year, the retail property sector is forecast with the strongest rental and capital value growth.

Colliers International forecasts the following:-

Colliers International: 2007 Forecast for Hong Kong’s Property Sectors (May 2007 – May 2008 % Increase YoY)

Retail

Looking at the retail sector, Colliers forecasts a significant jump in rentals and capital values over the next 12 months of 19% and 25%, respectively, the strongest by far compared to the other three sectors examined. The steady economic growth, positive sentiment on employment and job security, and wealth effect resulting from encouraging stock market performance continue to stimulate retail spending across the board.

Mr Lo explains, “There was a significant pick up of local consumption, and existing international retailers have proceeded with their expansion plans in anticipation of the Beijing 2008 Olympic Games. This has resulted in average monthly ground-floor rentals reaching HK$378 per sq ft, equivalent to a 10% QoQ growth (as at the end of May).”

Mr Antonio Wu, Executive Director of Investment Sales said that from an investment perspective, potential retail purchasers remained confident about the ongoing rental growth in the market. “Most of these investors are prepared to offer aggressive bids, translating into initial investment yields well below 3% during 2Q 2007. Likewise for the other property sectors, investors will be attracted to the market in order to take advantage of the current upward property cycle.”

Office
During the last 7 months, Hong Kong’s Grade A office witnessed strong demand due to several factors. One factor attributing to the strong activity was demand from key players from the finance industry expanding in anticipation of growing business opportunities.

Managing Director of Colliers International and Head of Commercial, Mr Piers Brunner commented, “Demand for prime office space in core business areas have showed no weakening. In Central, rentals continue to reach record breaking levels although in general there is a slowing rate of growth. The finance and legal industries are the main space demanders, whilst some non-finance companies are eyeing up Kowloon East. ”

Mr Brunner continued, “The market is expected to grow further backed by sound economic fundamentals. Office rentals will increase given the tight supply situation and, as a result more investors will be prompted to enter the market to ride this current property cycle.”

Colliers noted that the 20-quarter cycle measurement, a methodology to measure the performance of the local office market over the past few decades, forecasts a turning point on or before 2Q 2008.

Residential

Hong Kong’s luxury residential market witnessed a positive growth of both volume and prices. Mr. Ricky Poon, Director of Residential Sales said, “Over the last quarter, the number of sales transactions of premium units in the traditional luxury residential districts have registered an increase of 25%. Some brand-new developments continue to surprise the market with record-breaking transaction prices such as two houses up on The Peak selling for an average unit price of HK$39,100 and HK$41,000 per sq ft.” He added that due to the scarce supply in those traditional areas, strong buying interest would continue from industrialists for these types of properties.

Luxury residential capital values and rentals are expected to forge ahead by 11% and 8%, respectively over the next 12 months as the positive market sentiment continues says Colliers. 

Industrial

The industrial sector recorded upward movement in rentals and capital values. Mr Simon Lo commented, “The warehousing sub-sector saw the strongest growth. With the increasing rentals in quality industrial premises particularly those located in areas close to the ports or airport, some occupiers have moved part of their operations such as in the northern districts of Hong Kong.“ He said that locations like Yuen Long or Tuen Mun were popular locations.

Colliers International concluded that Hong Kong’s property market will continue to grow against the backdrop of sound economic fundamentals.