Rents in HK office market seen falling next year

HONG KONG: Rents in the world’s costliest office market, Hong Kong, may fall for the first time in four years as an equities rout weighs on sentiment in the financial hub.

Grade-A office rents in Central and Admiralty will decline by about 4% in 2019, Colliers International Inc said in a report. That compares with an estimated gain of 9 percent this year.

Declines in stocks this year have undermined confidence at the financial firms that rent more than half of the Grade-A office space in the central business district, the property brokerage said. Looming interest-rate increases and the U.S.-China trade war will also take a toll on sentiment, it said.

Office occupancy costs in Central stand at US$307 per sq ft, topping London’s West End and Beijing’s Finance Street, according to CBRE Group Inc.

Meanwhile, more signs have emerged that China’s housing market is cooling, with sales in the secondary market, land purchases by developers and contracted sales at the biggest builders all falling last month, as these three charts show.

Sales of existing homes, which are quarantined from the government curbs on the new home market, last month plunged to a four-year low in 10 major cities tracked by China Real Estate Information Corp.

Lacklustre sales will likely weigh on existing-home prices in coming months, Shanghai-based analyst Wang Zhaojin said. In September, new-home price growth slowed for the first time in seven months.

Cash-strapped developers are also pulling back. Land sales in 40 cities tracked by CRIC fell 0.5% in the first 10 months from the same period a year ago, a sharp contrast to the previous two years when land sales surged about 40%. With builders facing a record US$18bil of bond maturities in the first quarter of 2019, the cooling in the land market is set to intensify.

And it’s no wonder developers are turning cautious. Contracted sales at the 100 biggest builders declined 11% in October from September, CRIC data showed, even as some offered incentives ranging from free luxury cars and hefty discounts during a week-long national holiday. — Bloomberg