Jones Lang LaSalle’s year-end Residential and Land Market Review 2016 predicts that residential prices in Hong Kong will rise by about 5 per cent next year.
According to the financial and professional services firm land prices rebounded in the second half of 2016 as more prime sites were made available for sale amid active participation from People’s Republic of China (PRC) and local developers.
About 62 per cent of the residential sites made available for sale via government tender this year drew PRC developers, an uplift from the 53 per cent recorded in 2015.
According to a report by WorldPropertyJournal.com, PRC developers were on the winning end of 24 per cent of all residential sites sold this year, on par with a year ago. Their increased participation in the local public land sales market has been driven by a combination of yuan devaluation, a desire to diversify away from mainland cities and supply constraints of the local market over the longer-term.
The increased competition in the public land sales market saw 10 out of 13 residential sites sold at prices above market expectations in the second half of 2016. This is in contrast to the first half of the year when no sites were sold above the higher end of market estimates.
Additionally, there has been an increase in the average waiting time between winning bids by developer from 12.6 months in 2015 to 27.6 months in 2016 (year-to-date).
Looking ahead, JLL said there could be more developers entering into joint ventures to increase their chances of winning in government tenders.
“In 2016, Hong Kong’s heavyweight developers faced increased competition from both mainland developers and new local players. It has become harder for them to win land sites and we believe the situation will continue into 2017,” said Dorothy Chow, Regional Director of Valuation Advisory Services at JLL in Hong Kong.
“Mainland developers will remain active in government land sales to expand their business in Hong Kong, whilst local developers will likely focus more on opportunities in the New Territories and MTR projects,” she said.
However, there are still uncertainties in the public land sales market. This includes policy risks, such as demand-side measures that can distort market dynamics as well as risks in the global economy and volatility in financial markets that can impact market confidence.
Additionally, the changing policy direction in China can affect the land banking strategies of developers as well as the appeal of Hong Kong properties to mainland buyers.
Chow expects land prices to remain largely stable despite these uncertainties in 2017.