Leung Fung: Hong Kong property prices still face pressure, it is expected that the prices of ordinary residential properties will fall by up to 3% this year.

The latest "Hong Kong Quarterly Property Market Report" from Le Fang points out that, driven by the sale of first-hand residential properties, the residential property market has seen an increase in transaction volume, but prices still face pressure. Total residential sales volume in Hong Kong increased by 17% in June, mainly driven by a 28% increase in first-hand residential sales; residential transactions in the second quarter of this year increased by 37% compared to the first quarter. However, residential property prices still face pressure, with a 0.9% decrease from the beginning of the year to May, and a 6.2% decrease year-on-year. Buyers show the most interest in residential properties priced between 12 to 15 million Hong Kong dollars. In terms of new developments, Wong Chuk Hang and Ma On Shan are the most active areas for transactions; among them, SIERRA SEA Phase 1B and Dawn have shown strong sales. The luxury property market recorded 54 transactions with amounts exceeding 78 million Hong Kong dollars in the second quarter, a 29% increase from the previous quarter. The luxury rental market is performing well, with a 0.7% month-on-month increase in rent in May this year, and a 1.4% increase from the beginning of the year. The increase in non-local professionals and students is notable. Looking ahead to the third quarter of this year, there is also an increase in rental activities by young professionals, especially those relocating from the UK and Singapore to seek job opportunities in Hong Kong. Le Fang predicts that general residential property prices will decrease by up to 3% this year, while luxury and general residential rents will increase by 3% to 5%. Although residential property prices, especially those of second-hand properties, may continue to stagnate, it is believed that residential sales are likely to recover. In terms of Grade A office buildings, with the stable macroeconomic situation, market momentum is improving. Hedge funds are the main tenants of the office market, with large leasing transactions including Jane Street, an American investment management company, leasing 223,000 square feet of office space in Central's new waterfront 3. Law firms providing IPO services to Chinese companies may be a potential driver of office demand. Office units in Central with areas ranging from 3,000 to 5,000 square feet and well-finished interiors are highly favored due to their geographical advantages and usable space. Tenants are looking for high-quality office spaces with the greatest discounts. As the office leasing market is still recovering, tenants remain cautious when looking for high-quality and functional office spaces that offer the most incentives. In the first half of this year, Hong Kong's IPO financing performance has been outstanding, attracting mainland companies from multiple industries. The revival of IPO activities is expected to drive office leasing demand in the second half of the year on Hong Kong Island. Global trade and procurement uncertainties pose a challenge to the office leasing market in Kowloon, especially for tenants related to supply chain operations. Office leasing activities in Kowloon East were relatively calm in June. Rental growth in Tsim Sha Tsui was moderate, with a slight 0.7% month-on-month increase, driven mainly by demand from the insurance, finance, and professional services industries. Due to the overall weak demand for office spaces in Kowloon and continual increases in supply, landlords are offering various incentives to attract and retain tenants, with large landlords improving facilities and small landlords providing rental subsidies. The office market in Kowloon East faces challenges from global uncertainties. Benefiting from a tenant mix similar to Central, the performance of office spaces in Tsim Sha Tsui is expected to be better than in other areas. Although citizens' incomes are increasing, their consumption is decreasing, and interest in luxury goods among mainland tourists is waning, causing retailers to slow down their expansion plans and owners to reconsider their retail strategies. Furthermore, the consumption patterns of local citizens are gradually changing, with Generation Z becoming a key driver of luxury consumption. They place more importance on brand value, sustainability, and pricing transparency. Despite the recovery of the tourism industry in Hong Kong, retail consumption across various industries in Hong Kong has yet to fully recover.