The Hong Kong Property Market Yearly Review & Forecast by CB Richard Ellis

Hong Kong (PRWEB) January 29, 2008

A decade after the handover, China’s economic influence continued to grow, impacting the entire Hong Kong financial spectrum, including the property market. The appreciation of the RMB, in particular, is amplified in Hong Kong due to the Territory’s currency peg with the US dollar, any weakening of the dollar thus enhancing the purchasing power of Mainland Chinese visitors to Hong Kong. In addition to boosting their spending on high-end merchandise, the enhanced value of the RMB has also prompted high net-worth Mainland investors to acquire Hong Kong properties, particularly luxury residential properties, as long-term investments.

Other favourable factors directly or indirectly supporting property markets were also present in 2007, these included the record high premium Grade A office rents in Central, which boosted sentiment in both the office and property investment sectors. Furthermore, the announcement of major new infrastructure projects, the Government’s firm stance on land values, the private housing supply crunch, reduction of stamp duty, decline in the number of homeowners facing negative equity, the re-emergence of negative real interest rates and even the participation of institutional investors in the mass residential market; all of these factors acted to intensify activity in both the luxury and mass residential sectors.

“The influx of foreign institutional investors competing with local private investors for the finite supply of premium quality assets, led to brisk activity in the investment market active and supported prices. Mounting inflationary pressure, amid a weak US dollar and RMB appreciation, along with a high level of liquidity in the investment market as well as the perception of promising monetary returns combined to make real estate an attractive investment alternative, with investors seeking to capitalise on possible price appreciations,” said Kam-hung Yu, Senior Managing Director, Hong Kong, Southern China & Taiwan of CB Richard Ellis Hong Kong, who is also head of all operations in the three locations.

Outlook for 2008

Looking forward, CB Richard Ellis continues to see support for Hong Kong’s real estate sector on the wider front amid some macro-uncertainties between US and China. On the back of a relatively limited supply of quality property stock, the firming of capital values witnessed in 2007 is anticipated to last through the new year. With US interest rates set to decrease, and Hong Kong local banks likely to follow suit, resulting in both the return of the negative real interest rate era and the lowered cost of borrowing, many end-users and investors are likely to be prompted to diversify their capital into the property market, though interest rate movements will largely depend on longer-term global investment sentiment. Nevertheless, as the flight-to-safety trend among many overseas institutions and local investors seeking comparatively secured investment alternatives continue to drive interest in Hong Kong property, more opportunities are expected to emerge in the Hong Kong market over the near- to medium-term. Therefore, CB Richard Ellis expects that Hong Kong’s property market in 2008 will remain cautiously positive.

Kam-hung Yu concluded, “As a supply crunch is noted across all property sectors, the sustained local economic expansion and continued robust employment conditions, along with the negative real interest rate environment, are likely to combine to drive increased demand from both end-users and investors, reviving interest in real estate as a hedge against inflation. The diverging trends of the weakening US dollar and appreciating RMB are likely to continue to trigger volatility in the investment sentiment, thus prompting conservative investors to allocate part of their assets to real estate to ride out the storm. Regardless of what opportunities lie ahead, CB Richard Ellis will always abide by its core values of delivering an unparalleled level of service and excellence to our clients, working to maintain our leading position in the marketplace by best serving their various property needs.”

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