Jones Lang LaSalle: Residential property prices fell 5% in the next six months

Recently, the property price index has repeatedly broken, but Zeng Huanping, chairman and head of capital market of Jones Lang LaSalle, believes that the short-term trend of the residential property market is still bearish, given that the global economy is not good and the Sino-US trade war continues to bring uncertainties. It is estimated that residential property prices will fall by up to 5% in the second half of the year.

Demonstration activities will be observed

Zeng Huanping pointed out that the average monthly residential sales volume in the first half of this year increased to 5,753, a record high of nearly five years, mainly due to strong demand for housing. Benefiting from the rebound in trading, property prices have supported. The price of small and medium-sized residential houses increased by 3.9% in the first half of the year, recovering most of the decline recorded in the second half of 2018; the price of luxury homes also rose by 4%.

However, Zeng Huanping is still pessimistic about the property market. He believes that the Sino-US trade war will slow down the global economy and will offset the possible effects of interest rate cuts and affect the desire of home buyers. In the second half of the year, it is estimated that as many as 16,000 new units will be put on sale, which will be a new high for the past three years. The vacancy tax is about to be implemented and pricing is under pressure.

As Sino-US trade frictions continue, Zeng Huanping’s view on the decline in residential property prices in the second half of the year remains unchanged. It is expected that the decline will be within 5%, which will offset most of the increase in the first half of the year. It is expected that the annual growth will be moderate and the downside risk will increase. As for the impact of recent demonstrations on the property market, it remains to be seen.

Vacancy rate rises

In terms of commercial buildings, Yan Weicheng, a senior director of Jones Lang LaSalle’s commercial department, said that the global economy is not good and the company has reduced its expansion plan. In the first half of this year, the overall office leasing turnover in the first half of this year fell by about 11% from the second half of 2018. The leasing demand of Chinese-funded enterprises also saw a slowdown, and the newly leased floor fell by 53% year-on-year. At the end of June, the overall office vacancy rate reached 5.4%, which was the first time since the beginning of 2018. The vacancy rate in Central rose from 1.8% at the end of last year to 2.3% in June. He said that as demand continues to be weak, the vacancy rate will continue to rise. I believe that office rents have peaked and will continue to slow down in the second half of the year.

Chen Yaofeng, a senior director of Jones Lang LaSalle’s retail department, pointed out that the sluggish retail sales caused the rents of core street shops in the four major shopping districts to fall by 1.9% in the first half of the year. Among them, the rent of Central Street Shops fell by 6.9% year-on-year. The Sino-US trade war and recent social disputes have added uncertainties to the retail industry in Hong Kong. It is expected that street rents in the core areas of Hong Kong will fall by about 5% for the whole year.

However, most of the mid-priced retailers have not suspended their expansion plans due to social incidents. There are still new brands wishing to enter the Hong Kong market.