Despite concerns of increasing Chinese regulatory curbs on capital outflows, market sentiment in Hong Kong is expected to remain cautiously optimistic next year, according to the senior executives of the Pamfleet Group.
“It was a tale of two halves last year,” commented Andrew Moore, principal and chief executive officer of the Hong Kong-based real estate investment management firm. “Caution was the dominant word in the first half of the year, and in the second half optimism prevailed again. We expect to see cautious optimism next year as well.”
According to Moore, one of the biggest talking points next year will be how effective the Mainland clampdown on outbound investments will be in the next twelve months. Mainland Chinese firms, Moore says, have been driving the occupancy market in the core Central business district, and have also been buyers for some of the sites sold recently. Many Chinese asset management firms for instance have established a presence in Hong Kong in recent years.
Earlier this month, the Shenzhen-Hong Kong Stock Connect made its debut. The new trading link allows foreign investors to buy mainland-listed shares, and conversely Mainland Chinese investors to invest in Hong Kong-listed stocks, a move that is expected to drive further integration between the two economies.
According to Moore, a lot of brokers had already positioned themselves in anticipation of this trading link, and so it might not be too much of a driver next year.
Both Moore and Allan Lee, principal and managing director for Pamfleet, believe decentralized locations such as Kowloon East will be the commercial markets to watch out for next year, as tenants look to non-core districts for office space due to constrained supply in Central.
“The gap between the Grade A rents in Central and the decentralized locations has never been higher,” said Moore. Central rents will continue to increase next year but those in the decentralised locations will be under pressure because of supply.”
However, Lee does not think any macro event would necessarily lead to a drop in property prices in Hong Kong.
“In the recent years, whenever the market has been under pressure the government has stepped in to calm things down. Unless there is a huge macro event that could potentially rock the market, the only change we will see will be in terms of a drop in volumes. But that will not mean a drop in pricing.”