Persistently low interest rates (the Fed is expected to keep rates close to zero until 2022) as well as low levels of near-term commercial supply;
We will only see two Grade A office projects (a total of 400,000 sq.ft net, both in decentralized areas) and one shopping centre (LOHAS, 470,000 sq ft) completed this year, remain the two supporting pillars of the commercial market.
Office demand is likely to be given a boost in the near term by a rebounding stock market (a 3.5% increase in a turbulent Q2) and a robust IPO pipeline, where Chinese unicorns such as JD.com and Baidu are considering following in the footsteps of Alibaba with a secondary listing in Hong Kong. Proposed travel relaxations with Mainland China, as well as incentives from the government, including the HK$10,000 handout to all Hong Kong citizens and several rounds of Employment Support Scheme payments amounting to HK$81 billion, as well as various discount programmes from businesses may reinvigorate interest among both local consumers and visitors in the coming months.
Nevertheless, a deepening economic recession, local political uncertainties as well as macroeconomic turbulence (US / China tensions the most significant), as well as the possible resurgence of the virus are all factors which may negatively impact local property investment sentiment in the second half of the year.
Mr. Simon Smith, Senior Director, Research & Consultancy commented: “With most local businesses resuming normal operations, sentiment may gradually improve in the second half, with low interest rates and limited commercial supply continuing to support commercial prices.”
Mr. Peter Yuen, Managing Director, Head of Investment and Sales said: “In a highly uncertain environment, deals are still being closed as over leveraged investors offload to cash rich and opportunistic players looking to take advantage of discounts. This window is closing quickly, however.”
Ms. Sharon Fong, Senior Director, Retail Sales commented: “The retail market bull run from 2004 to 2013 has unwound and rents have currently stabilised while the rate of decline in values has remained constant and there may be more room for a further slide in the third quarter.”