Hong Kong high street rents saw modest single-digit growth in the second quarter of 2024 with a steady rise in inbound tourist numbers, according to real estate service firm Cushman & Wakefield.
Also, the overall high street vacancy rate remained stable from April through June despite a decline in retail sales amid the northbound spending enthusiasm, according to the property consultant.
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Of the key retail districts, Tsim Sha Tsui saw the greatest tourist numbers and consumer footfall, bringing a drop of 1.2 percentage points in the vacancy rate to 10.6 percent in the second quarter.
Kevin Lam, executive director and head of retail services for Hong Kong at Cushman & Wakefield, forecast that rental growth for high street shops across districts in the second half of the year will range from 0 to 5 percent.
“Regarding leasing activity, although some international brands have taken advantage of the current attractive rental level to open stores in core areas during the quarter, most retailers will remain cautious in expansion activities,” Lam said.
Observing the shift in tourist preferences from shopping-centric trips to more immersive experiences, Lam said that Hong Kong has the capacity to integrate a mega-event economy with elements of culture, sports, retail, and dining.
Such an integration would enhance the distinctiveness of the travel experience in the city, assisting the retail market in overcoming obstacles, he said.
For the residential market, Cushman & Wakefield forecast a decline of up to 5 percent in home prices for 2024 as higher interest rates are expected to persist through the second half of the year.
Meanwhile, the total number of transactions is expected to rise around 15 to 20 percent to 50,000 units from the low point of last year.
Rosanna Tang, executive director and head of research for Hong Kong at Cushman & Wakefield, said the United States’ timetable for interest rate cuts has been delayed compared to earlier market expectations.
Even if the US implements interest rate cuts in the second half of the year, it is believed that the adjustment will be limited, and Hong Kong banks may not necessarily follow suit immediately, Tang said.
Additionally, the momentum released by the removal of all property cooling measures in February fizzled out as local banks in the city are adopting a more cautious lending approach, she added.
Financial Secretary Paul Chan Mo-po announced in his budget speech this year the decision to cancel decade-old property curbs, namely the Buyer’s Stamp Duty, which targets non-permanent residents; the New Residential Stamp Duty for second-time purchasers, and the Special Stamp Duty.
The property demand-side curbs, also known as “spicy measures”, were introduced in 2010 to rein in housing prices. Under pressure from rising borrowing costs and a sluggish economy, the property market has struggled to cope with a downward spiral in recent years.
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However, home prices have continued to fall even after the full removal of the curbs. According to data released by the Land Registry on Wednesday, the number of residential unit transactions decreased by 30.5 percent to 3,856 in June compared to the previous month. Meanwhile, the sales value dropped by 35 percent to HK$34.5 billion ($4.42 billion).
Another property consultant JLL said in its latest report on Tuesday that several new developments have entered the market priced at more than 10 percent lower than comparable projects in 2015.
More policy supports are needed to restore supply-demand balance and avoid a vicious cycle of falling property prices, said Norry Lee, senior director of projects strategy and consultancy at JLL in Hong Kong.
Buyers may delay their purchases if they anticipate further price declines, which could lead to a continued drop in property prices, he said.
