RICS Global RE Weekly: Hong Kong Residential and Commercial Property Hits Buffers

Unemployment data in Hong Kong are due for release on Tuesday 18th. The September number showed a small increase in the jobless rate to take it back up to 3.4%. To put this figure in some context, the recent high in unemployment in the country was 8.5% back in 2003 while the low for the cycle was 3.2%.

Meanwhile, the latest RICS Global Property Survey suggests that sentiment in the commercial real estate market in Hong Kong has already taken a heavy blow on the back of fears of a pronounced slowdown in the economy. Tenant demand for space has turned decisively negative in the office industrial and retail sectors. Rent expectations are also under heavy pressure.

Significantly, concern over the outlook for the economy is already having a meaningful impact on the residential property market. New mortgage loans approved have pretty much halved over the past year. Prices have yet to adjust in a material way but the risk, as the jobless total climbs, is that the dearth of transactions will force a greater degree of realism onto vendors. A double digit drop in prices now looks inevitable despite the recent actions of the Hong Kong Monetary Authority to make liquidity more readily available.

More gloomy news expected from US housing market

The next insights into the US housing market will come in the form of the NAHB housing market survey for November (on Tuesday 18th) and housing starts data for October (on the 19th). Given that recent economic data from the US has been almost unambiguously terrible, it's likely that these data will continue in line with recent weakness.

Japanese construction spending to head lower into 2009

Next week sees several pieces of Japanese economic data released which will confirm that the economy is sliding into a recession as the global economic storm shows few signs of easing. Q3 GDP is released on Monday 17th. RICS expect it to show a mild contraction in output for the second consecutive quarter. Construction spending figures also due on 17th may show some improvement on a year earlier, despite a more subdued outlook in recent months, on a rebound in housing construction.

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Source: RICS

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