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Property
& Real Estates Industries
Hong Kong's property and real estates market have been combating rising unemployment
rate, 54 consecutive months of deflation and contracted demand in the past few
years - SARS was like pinches of salt on the open wound.
The outbreak of SARS had worsened the market slowdown since late February.
For property sales and rental market, the outbreak of SARS has interrupted both
the first and secondary property markets because buyers and sellers stopped house
viewing for fear of getting infected. For landlords, they faced the pressure to
give discounts or holidays on rents to their office and retail tenants.
In April 2003, Moody's Investors Service has cut Wharf
(Holdings) rating from "positive" to "stable", Hysan
Development and Hong Kong
Land were changed to "negative" from "stable". Developers
had no choice but to suspend sales promotion and push back project launches.
As of 7 May, 03, Henderson Land Development granted rent concessions to 150
retail tenants operating in its shopping malls - the first among major developers
in the territory - to ease cash flow problems of tenants seriously battered by
the SARS outbreak.
SARS' Impact on Property & Real Estates Industries
- Due to the slowdown in the property market, real estate agents had cut staff
to reduce cost of operation.
- Morgan Stanley
predicted a further 15 to 20 per cent fall in property prices over the next two
years.
- Bank of China International
downgraded the outlook for Hong Kong's weather-beaten property sector, forecasting
a 15 per cent drop of residential prices in the next 18 months.
- Since the peak of 1997, property prices have already tumbled down 68 per cent.
For the first four months of 2003, the market has dropped 10 per cent. Price war
amongst developers will ensue which will further delay purchasing decisions of
home-seekers.
- It is forecasted that in short-run, tenants in the retail and catering industries
were poised to be granted rental deduction of 10 to 40 per cent for two to three
months on top of rental payment deferral. In the long run, retailers will not
want to expand, even if there is the opportunity.
Positive Outcomes of the SARS Crisis
The good news was that, a resourceful segment has emerged in the crisis - the
high-end retail outlets. According to Jones
Lang LaSalle, average rentals for prime shopping malls slid by less than 4
per cent last year, and were the most resilient in the retail sector. Six retail
shops at the new commercial building One
Peking, in Tsim Sha Tsui, at an average net rental of HK$200 to HK$300 per
square foot per month has been leased out. Those shops are 4,000 to 6,000 square
feet each. Apparently there is a keener demand for flagship outlets as the supply
is rare.
Actions
Since the property market is reliant upon Hong Kong's economy, there seemed
not much that can be done for a rebound before SARS is completely controlled and
normal economic activities is restored.
Notwithstanding, it is encouraging to know that as concerns of SARS have abated,
the secondary residential sales have shown a slight rebound. Since the World
Health Organisation (WHO) lifted the travel advisory, business in the tourism
and retail sectors was forecasted to return by next January to 80 per cent to
90 per cent of levels seem before the SARS outbreak. According to Ricacorp Surveyors
senior sales director Ray Yung, that means more investors are going to rent or
buy retail outlets in the coming months as business return to normal, especially
in tourists areas such as Tsim Sha Tsui, Causeway Bay and Mongkok.
Last Modified Date : Tuesday, January 27, 2004 5:08:58 PM
Sources of information:
- Interview with Mr. Lun Chi-Yim, Chairman,
Hong Kong Real Estate Agencies General Association. 23rd May 2003.
- South China Morning Post
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