New Business research report from Business Monitor International is now available from Fast Market Research

Boston, MA -- (SBWire) -- 02/12/2013 --The Hong Kong Real Estate report examines the commercial office, retail, industrial and construction segments throughout the country in the context of a cooling market. The report covers rental market performance in terms of rates and yields over the past 18 months and examines how best to maximise returns in the commercial real estate market, while minimising investment risk and exploring the impact of the necessary contraction in the property market.

According to our most recent round of in-country interviews which were conducted in July 2012, rents in Hong Kong could see a subdued second half of 2012 in all commercial sub-sectors, as the economy continues to exhibit increasing signs of weakness. Also, we are seeing strong signs of a marked slowdown in the retail sector which, coupled with corrective pressure in the property market, means that consumption momentum should slow further. We consequently see fit to maintain our bearish outlook on the economy and see real GDP growth coming in at 2.2% in 2012, versus consensus expectations for 3.0% expansion. We expect this economic weakness to extend into 2013, with economic growth seeing a marginal acceleration to 3.5%.

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Key Points

- We have seen fit to downgrade our forecasts for Hong Kong's real GDP growth. We now see 2012 growth in the city slowing from a previous estimate of 2.2% to 1.6%. This remains below the consensus projection of 2.5% and close to the midpoint of the government's recently revised forecast range of 1.0% to 2.0%. Our 2013 forecasts have also been revised downward to 2.5% from a previous estimate of 3.5%.
- Hong Kong's property market is undergoing a necessary correction. We are not discounting a further marginal near-term upside in prices, as investors ride on bullish sentiment from the equity markets, as well as the third round of quantitative easing. That said, we believe that receding demand, stemming from further economic deterioration and the government's tightening measures, coupled with the anticipation of a meaningful increase in the housing supply in the coming years, will combine to enforce a correction in property prices in 2013.
- We expect the housing correction to weigh on the government's revenue stream. Moreover, the government appears on course towards upgrading the social welfare infrastructure and we should continue to witness an increase in welfare disbursements as growth concerns come to the fore in 2013. While we expect to witness some deterioration in the government's fiscal position, we believe the decline is unlikely to be of material effect.

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