Cushman & Wakefield Monthly Market Update: Impact of BSD and SSD seen; properties still popular to fight inflation

HONG KONG, Nov. 15, 2012 /PRNewswire/ -- Cushman & Wakefield published Monthly Market Update, commenting on large-amount transactions and trends in commercial, retail and residential markets, and making forecasts.

John Siu, Managing Director, Hong Kong, said, the government has recently introduced Buyer's Stamp Duty (BSD) for non-Hong Kong permanent residents and companies incorporated on their purchase of residential properties, and adjusted Special Stamp Duty (SSD) on transactions of residential units and extended its application period. The new measures are mainly to lower pressure of increasing property prices in the short term by curbing housing demand of non-local buyers. BSD is de facto 'Hong Kong land for Hong Kong people'. Mr Siu believes extending the validity of SSD can to a certain extent synchronise the peak of supply of new homes in 2015 so that demand and supply for residential properties can be balanced. Commenting on the chance that SSD may later be applied to non-residential properties, Siu expects more opposition will be met. One has to admit that transactions of those non-residential properties are normal business activities, and have less direct impact on people's livelihood. If restrictions on non-residential properties are imposed, Hong Kong's reputation as a free market will be harmed; investors may lose confidence in Hong Kong.

Redevelopment of TaiKoo Place calls for more leasing activities

Gary Fok, Senior Director of Commercial, Hong Kong,said, the market has its attention on the leasing transaction of 169 Electric Road in North Point, which is a good reference for the office market in the district. Also, as Somerset House at TaiKoo Place is to be rebuilt soon, tenants have to relocate their offices, driving demand for offices in other areas. Maxim's Group has committed to six floors at 1063 King's Road with a total floor area of 58,000 sq ft from Q2 2013, whereas the original occupier, Ageas, will move to World Finance Tower at Tsimshatsui for a 50,000 sq ft office at that time. The redevelopment of the Quarry Bay techno-centre stimulates lease activities, further lowering availability rates outside Central.

Investors' focus shift to non-residential market

Michele Woo, Senior Director of Retail Transaction Services, Hong Kong, said, BSD and SSD have a huge impact on transactions in residential market and create uncertainties. Consequently investors' interest has been diverted to non-residential properties, including commercial and retail investments. Recently retail leasing is quiet and landlords are now more receptive to confirm in more flexible terms and lower than expected rental. This to a certain extent reveals that rents may have reached their peaks.

More transactions due to QE3

Kent Fong, Co-head of Investment, Hong Kong,said, before the government announced the drastic measures of BSD and SSD on purchase of residential units, QE3 has already boosted the sentiment; all sectors were very hot. The expected high inflation rate and extended low-interest rate environment will continue to make properties good choices against fall of purchasing power. It is expected the market will witness record prices of industrial buildings, retail stores and car parking space.

Property prices and rental trends remain uncertain

Vincent Cheung Kiu-cho, National Director of Valuation and Advisory Services, Greater China,said, BSD and SSD are striking measures to the residential property market. Buyers now have more to worry about when they want to enter the market. As low-rate environment is still present in Hong Kong, landlords remain confident about the market, and they hardly agree to reduce their asking prices. Negotiations will continue. Cheung expects transaction volume will go down by 30% to an extremely low level in the next 12 months since last month. Cheung points out that since the government hopes the housing market can develop steadily, policies alone to suppress demand are not sufficient. The administration should increase land supply, and also set out a clear and detailed schedule of land plots to be made available, so that Hong Kong people can understand more about supply of flats in the years to come.

About Cushman & Wakefield
Cushman & Wakefield is the world's largest privately-held commercial real estate services firm. The company advises and represents clients on all aspects of property occupancy and investment, and has established a preeminent position in the world's major markets, as evidenced by its frequent involvement in many of the most significant property leases, sales and assignments. Founded in 1917, it has 235 offices in 60 countries and more than 14,000 employees.  It offers a complete range of services for all property types, fully-integrated on a global basis, including leasing, sales and acquisitions, debt and equity financing, investment banking, corporate services, property management, facilities management, project management, consulting and appraisal. The firm has more than $5.5 billion in assets under management through its wholly-owned subsidiary Cushman & Wakefield Investors. A recognized leader in local and global real estate research, the firm publishes its market information and studies online at www.cushmanwakefield.com/knowledge. In China, Cushman & Wakefield maintains six market-leading offices in Beijing, Shanghai, Chengdu, Guangzhou, Shenzhen and Hong Kong. More information is available at www.cushmanwakefield.com.