Looking ahead to this year, DBS Bank (Hong Kong) research analyst for the Hong Kong property sector, Mr Yau Cheuk-man, said yesterday that the full resumption of quarantine free customs clearance between the Mainland and Hong Kong has led to local buyers taking more active steps to enter the market in anticipation of the economic recovery, supporting the recent performance of the property market, and I believe the government will not "pull the plug" on the property market in the Budget.
Mr Yau pointed out that geopolitical tensions and interest rate hikes will continue to affect the performance of Hong Kong's property market this year. The prime rate (P) is expected to rise to around 6% this year and will remain there for some time, while mortgage rates will rise to almost 4%, coupled with the weak performance of first-hand sales last year, causing developers to accumulate inventory.
He therefore expects property prices in Hong Kong to remain stable this year, with prices of luxury properties, which have been slow to turn over, expected to rise by 5%.
With market conditions stabilising, he believes there is no urgency for the HKSAR Government to announce a 'pulling back of the spice' for the property market in the Budget to be announced on Wednesday.
On the other hand, there have been several abortive bids for sites recently. Yau said there was still a risk of abortive bids for larger sites valued at more than $10 billion this year, and an even higher risk for longer-term development and commercial projects, as the global economic environment is not too good at the moment.
In addition, he said the vacancy rate in Central was 8.8% in December last year, while the overall office vacancy rate rose to over 12%. There is still a large supply in the local office market and the risk of recession in many countries in Europe and the US is affecting the demand for corporate expansion.
As the pre-letting rate of the two new commercial buildings to be completed in Central is still low, he expects the vacancy rate of Central office buildings to rise through 9% this year, and the overall rental rate to drop by another 5% this year.
