Hong Kong commercial property market recovers confidence in early 2019, confirms RICS report

Commercial sales and rental values stabilise amid increased market confidence, report industry professionals

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HONG KONG, CHINA - Media OutReach - 7 May 2019 - The stagnation experienced across Hong Kong’s
commercial property market last year has eased, as confidence returns moving
into 2019, according to an authoritative new report by the RICS (the Royal Institute of Chartered Surveyors).

Growth on the Chinese Mainland and a
relaxation of trade war fears are chief among the factors helping the market
towards stability, according to the recently published Hong Kong Commercial
Property Monitor.

RICS’s quarterly report surveys experts in
the city’s sales and letting markets, who reported a substantial shift in
market sentiment from negative to neutral forecasts. The Investment Sentiment
Indices (ISI) — a measure of supply, demand and expectation — reported a jump to
+3% in the first three months of 2019, from -13% in the last quarter of 2018,
while the Occupier Sentiment Indices (OSI) recorded a similar increase from
-18% to -1%.

Together these figures represent a relieving
moment of stability following a turbulent period of market scepticism. The
stabilization comes as a number of external risks have been mediated, the
report notes, identifying three key factors: Steps taken by the Chinese
government to support Mainland growth, as well as a period of cooling in the
US-China trade war, while global interest rate cycles have been put on hold.

The report’s author Sean Ellison, RICS
Senior Economist for Asia-Pacific, said: “Survey
respondents continue to signal a ‘soft landing’ for most commercial property
markets. The market appears to be preparing for a period of below-trend, but
generally positive, growth in capital values and rents, rather than a sharp
contraction. However, the outlook is still clouded by uncertainties surrounding
trade, and other macroeconomic risks.”

Yet looking ahead professionals reported no
increase in commercial occupier demand — following a marked pullback in the
final quarter of 2018 — despite an increase in both rental and landlord supply.
Meanwhile experts forecast a modest rental growth of +1.6% across the
commercial sector over the next 12 months, while capital values are expected to
increase by 2.2% in the same period.

The RICS Hong Kong
Commercial Property Monitor is a quarterly sentiment index tracking trends in
the commercial property market. It is a leading indicator for global investment
and occupier markets. The full report is available at www.rics.org/economics

About RICS

Confidence through Professional Standards

RICS promotes and enforces the highest
professional qualifications and standards in the development and management of
land, real estate, construction and
infrastructure. Our name promises the consistent delivery of standards —
bringing confidence to the markets we serve.

We accredit 125,000 professionals and any individual
or firm registered with RICS is subject to our quality assurance. Their
expertise covers property, asset valuation, real estate management; the
development of infrastructure; and the management of natural resources, such as
mining, farms and woodland. From environmental assessments and building
controls to negotiating land rights in an emerging economy; if our members are
involved the same professional standards and ethics apply.

We believe that standards underpin effective markets.
With up to seventy per cent of the world’s wealth bound up in land and real
estate, our sector is vital to economic development, helping to support stable,
sustainable investment and growth around the globe.

With offices covering the major political and
financial centres of the world, our market presence means we are ideally placed
to influence policy and embed professional standards. We work at a
cross-governmental level, delivering international standards that will support
a safe and vibrant marketplace in land, real estate, construction and
infrastructure, for the benefit of all.

We are proud of our reputation and work hard to
protect it, so clients who work with an RICS professional can have confidence
in the quality and ethics of the services they receive.