Transcript - Professional Property Services Limited

Future Direction of the Property
Market in Hong Kong & Macau
Nicholas Brooke, FRICS FHKIS
Chairman, Professional Property Services
5 June 2007
2006 Recommendations
Soho District – up 15-20% dependent on
property
Discovery Bay – up 15- 20% on small to
medium low and mid-rise properties
Hope you bought in both Soho and
Discovery Bay
If not, what should you do this year?
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Soho District, Central
Discovery Bay, Lantau
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Background
Sales volume fluctuated during early 2006,
notwithstanding reduced concerns over interest
rates
However, total transactions still exceeded
100,000 in 2006
Some impact on pricing but luxury market
remarkably strong
Clear emergence of growing divergence
between luxury and mass market trends
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The Arch, West Kowloon
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Current Situation
Noticeable improvement in sales volumes 2007
– over 51,000 transactions in 5months
Variety of new releases and competitive loan
packages
Recent land auctions for luxury residential sites
have been well contested
Rents and prices risen in luxury sector but mixed
signals form mass residential market
Stock market boom good for sentiment but a
sustained correction here or in Shanghai could
have adverse impact
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The Bel-Air, Pokfulam
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Rents and Prices –
Luxury Market
Luxury prices on Hong Kong Island averaged
HK$10,020 psf during Q1 2007
Flat prices on the Peak averaged HK$13,500
psf whilst a penthouse in The Legend sold for
HK$33,000 psf
Luxury house prices averaged HK$18,000
psf on Hong Kong Island
rents on the Island averaged HK$36.00 psf
per month with Peak averaging HK$45.00 psf
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Luxury Residential Capital Value
Rents and Prices –
Luxury Market
Very low vacancy rate - below 3.0%
Leasing market expected to remain
strong in 2/3Q 2007 – 10% uplift
Luxury prices on Hong Kong Island rose
22% in Q1 2007, Kowloon 10% and
New Territories 37%
Further increases in the sales prices
expected during the year – 15/20%
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Luxury Residential Rental Value
Rents and Prices –
Mass Residential Market
Prices eased slightly over Q1 2007 to average
HK$4,700 psf across Hong Kong
New projects being released a few units at a
time
Although economic conditions continue to
improve, this sector is affected by major
changes in Hong Kong demographics
Population hollowing – negative growth territory
Dependent on newly weds and upgraders
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Future Supply
Debate as to adequacy of future supply
Predicted to be of the order 15,000 p.a. –
cf 30-35,000 when Hong Kong in growth
mode
Government control of land supply should
underpin prices
Modest growth anticipated in line with
GDP performance
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Future Supply
Purchase for investment by PRC and
Asian nationals likely to fuel demand for
luxury property
Repositioning of real estate as an asset
class
Most investors increasing their allocation
to real estate
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2007 Best Buys
Luxury houses in the New Territories
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Lifestyle choice for many
Buy on estates, not in villages
Require good accessibility to MTR or KCR
Significantly cheaper than on the Island or in
Kowloon
Office Sector
Growth in economy continues
– 2005 – GDP 7.5%
– 2006 – GDP 6.9%
– 2007 – GDP 5.6 in Q1
Little new supply in short term except in
decentralised areas
Central rents continue strong; secondary
districts less so
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Office Rental Value
HK$psf pm (Net Effective)
Office Sector
Renewed emphasis will be on
decentralisation due to high Central rents
Weight of institutional funds will maintain
high value regime
Disconnect between yields and capital
values
Opportunities for small investors in
decentralised areas
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Macau
Receiving increased attention
Increases in values in 2004/05 of 50% but now slowed and in some cases
declined
Reality little of quality except for new
projects
Many units in hands of speculators
Many new units under construction
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One Macau Residences
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Macau
Prices average between HK$2,500 –
HK$3,300 per square foot but
One Central (Hongkong Land) selling at
HK$5-6000 per square foot
Wait on new developments proposed
around Nam Van Lakes
Likely to set new benchmark of quality
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2007 Best Buys
New (off plan) luxury units in Macau
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Lower cost of entry
Strong rental market in the future
Limited supply
Many overseas residents expected to arrive
in coming years to staff new casinos
– Improved links to Hong Kong and Zhuhai in
future
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Thank you
PPS
Professional Property Services Limited