Luxury property prices in Hong Kong will decline by up to 20 per cent next year after falling 4.7 per cent in this year, as Beijing continues to maintain capital controls and China’s economy feels the impact from the US-China trade war, according to international property consultancy JLL.

“The economic slowdown in mainland China and Hong Kong will dampen housing demand, particularly in the luxury residential market that relies on demand from China,” said Joseph Tsang, chairman of JLL in Hong Kong.

Rival Knight Frank, however, expects prices in this segment to decline by only 5 per cent in 2020 and transaction volumes to remain low.

“Luxury homes on The Peak, Mid-Levels and Island South are rare products like antiques. These rich owners have holding power and may just offer 5 per cent discount but are unlikely to slash prices significantly,” said Thomas Lam, executive director of Knight Frank.

JLL meanwhile expects mass residential property prices to fall between 10 and 15 per cent next year, after slipping 2.5 per cent in the second half of this year.

Tsang said the biggest factor that was likely to weigh on the mass property market was unemployment.

“The social unrest has actually resulted in quite serious damage to retail, tourism and hotels. And all these trades roughly adds up to around 15 per cent of our total working population of 4 million. That’s about 600,000 being affected,” said Tsang.

The Hong Kong Retail Management Association said on Monday that 5,600 people could be laid off in the next six months amid a worsening economy.

Wong said that the mortgage easing policy and interest-rate cuts will not help the property market much as the job market concerns will affect buyers’ confidence.

He added that it was not just secondary market sellers that will put pressure on prices. Developers too will play a role as they try to offload several hundred unsold units to avoid the looming vacancy tax on ready but empty units.

Meanwhile, JLL expects rents for grade A offices to drop between 10 and 20 per cent next year as the vacancy rate reached record high of 5.9 per cent this year, the highest since 2010.

“The demand for overall office space in 2019 has dropped considerably – by about 31 per cent – compared to 2018,” said Alex Barnes, head of markets of JLL.

Offices in Central, Wan Chai, Causeway Bay and Tsim Sha Tsui will be the most susceptible to the weak demand.
On the retail front, JLL expects street-level shop rents to decline 15 to 20 per cents next year as sales have taken a hit because of a drop in the number of tourists amid the ongoing anti-government protests. Already, retail rents have fallen by 18.4 per cent this year.

“Retail levels have already undergone substantial correction and is getting closer to the bottom,” JLL said.
However, some businesses are taking advantage of falling rents to expand. Hamburger chain Five Guys, which just opened their third and largest restaurant in Central, is still looking to expand as Hong Kong is still important market for such international retailers.