Colliers Hong Kong Research Papers

1) The lowest potential supply target from land sales and developments for FY2018

News

The Financial Secretary Paul Chan expects the future residential completion target for the next five years to increase to an annual average of 20,800 units, an increase of 50% over the completion target of the previous five years. However, the 27 residential development sites included in the 2018-19 Land Sale Programme will only provide 15,200 units. Together with railway property development projects, the Urban Renewal Authority’s projects, and private development/redevelopment projects, the total new supply is estimated to reach 25,500 flats in FY2018/19 –  the lowest since 2011. There will be 5.7 million sq ft (530,000 sq m) of commercial floor area, provided by four commercial/hotel sites, including three sites located in Kai Tak. The site above the Guangzhou-Shenzhen-Hong Kong Express Rail Link (XRL) terminus in West Kowloon spans an area of 632,917 sq ft (58,800 sq m) and will be the largest commercial site being sold in the past 20 years. It will provide a Gross Floor Area (GFA) of 3.16 million sq ft (293,574 sq m), whereof 2.8 million sq ft (260,130 sq m) will be used for office and 310,000 sq ft (28,800 sq m) are earmarked for retail. (Source: The 2018-19 Budget, 28 February 2018)

Research View 

The Hong Kong government is likely to miss its supply target for the FY2017/18, with only nine out of 28 residential sites planned for sale having been sold so far. Hence, we doubt that the government will achieve its land sales target of 27 residential sites or 15,200 units for FY2018/19. With eight out of the 17 sites available located in the Kai Tak Development Area, the area will continue to be the focus of the market. We expect that the tenders for the sale of government land will attract several participating bidders from both local and mainland Chinese developers, and that land value will break new records under the current market circumstances.

We expect the commercial site above the XRL terminus in West Kowloon to be regarded by developers as equivalent to the International Commerce Centre. This is likely to have a positive impact on office prices in Tsim Sha Tsui and the Jordan area. With the opening of the XRL, the surrounding area of the new terminus is likely to become a hub for PRC companies. On the other hand, Kowloon East, the CBD2 which includes Kwun Tong, Kowloon Bay, and Kai Tak, will continue to expand with Kai Tak serving as major source of supply in the medium term.

2) Strong consumer sentiment to continue in 2018

News

According to latest data released by the Census and Statistics Department, the recovery of the retail market has continued as the value of total retail sales, provisionally estimated at HKD44.9 billion (USD5.8 billion), rose by 4.1% YOY in January. In descending order of sales value, jewellery and watches sector sales were leading the growth, surging 10.4% YOY; followed by wearing apparel, and medicine and cosmetics sales which grew by 3.3% YOY and 12.1% YOY, respectively. Electrical goods and other consumer durable goods, not elsewhere classified jumped by 21.1% YOY, while weak supermarket and department store sales led to a decline of 13.3% YOY and 4.6% YOY, respectively in these sectors. (Source: Census and Statistics Department, 2 March 2018)

Research View

The continuing recovery of retail sales is suggesting a solid consumer sentiment at the beginning of 2018. Going forward, strong local demand and a sustained recovery in tourist arrivals should support our expectation that retail sales will rise at an accelerated growth rate of 4-5% YOY in 2018. A strong employment market with a low unemployment rate remaining at 2.9% in January, together with upcoming salary tax cuts and increased allowances for children and grandparents as proposed in the 2018-2019 Budget Speech, will increase spending power of the middle class. The additional funding of HKD396 million (USD51 million) earmarked for the tourism industry, of which more than half will be provided for the Hong Kong Tourism Board to implement the Development Blueprint, aimed at developing a sustainable, more diversified visitor portfolio and attract high value-added overnight visitors, should further facilitate inbound tourism and thus greatly support Hong Kong’s retail business. 

3) Central Industrial Building acquired for redevelopment for sale

News

Excellent Delight, an indirect wholly owned subsidiary of Hanison Construction Holdings, formed a joint venture with an undisclosed investor to acquire Central Industrial Building located at 57-61 Ta Chuen Ping Street in Kwai Chung, New Territories, for a reported amount of HKD720 million (USD92 million). Based on the GFA of 173,000 sq ft (16,000 sq m), the unit price for the seven-storey building was HKD4,162 (USD534) per sq ft. Its transaction value is 75% above the asking price of HKD400 million (USD51.5 million) from 2015, when the building was being marketed for sale. Investors plan to redevelop the industrial property, currently zoned for industrial use, for sale. The property can yield a maximum GFA of 237,200 sq ft (22,036 sq m) through redevelopment. According to Hong Kong Economic Times, Hanison has partnered with China Merchant’s Group for the redevelopment project.  (Mingtiandi, 1 March; HKET, 2 March;  HKEXnews, 28 February 2018)

Research View

We are still waiting for details on the potential revitalisation, due to be announced in mid-2018. We expect that the potential revitalisation scheme will be one of the major drivers for investment demand amid limited supply for industrial buildings. Compared to Kowloon East, Kowloon West enjoys an advantage from being located closer to Central, Hong Kong International Airport, and the XRL terminus. Kowloon West’s transformation from an industrial area to a commercial cluster should become an opportunity for investors who look for value-added investments amid low property yields, so they can redevelop or revitalise industrial buildings into commercial buildings for higher property values and returns.

Он немного постоял, наслаждаясь ярким солнцем и тонким ароматом цветущих апельсиновых деревьев, а потом медленно зашагал к выходу на площадь. В этот момент рядом резко притормозил мини-автобус. Из него выпрыгнули двое мужчин, оба молодые, в военной форме.

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