Boston, MA -- (ReleaseWire) -- 01/07/2014 -- The real estate market in Hong Kong is characterized by consistent demand stemming from its financial and retail reputation as well as notable structural challenges as its integration with China continues. Significant increases in middle-income Chinese tourists has boosted both real estate and industrial investment opportunities, as international brands and modernized logistics facilities compete for space on all levels.
Though retail and industrial rents have been boosted by increased consumption from the mainland, long term questions remain as to the pattern of Chinese demand as well as Hong Kong's own economic slowdown. With the abovementioned factors in mind, we have revised our real GDP growth forecasts marginally upwards to 2.8% from 2.4% previously. In 2014, however, BMI maintains projection for GDP growth of 3.0%, which remains below consensus estimates of 3.5%.
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Economic momentum in the region, particularly in China, appears to be on the uptick and this is likely to translate into stronger shipments for Hong Kong. However the economy faces tough headwinds, from its exposure to China to the impact of looming interest rate rises in the US that could depress prices after years of high growth.
- Demand and consumption patterns in Mainland China as well as U.S. interest rate decisions will be the most significant external risks to Hong Kong's commercial real estate sector through 2013 and into 2014. At present, the government is struggling to manage its relationship with CCP Beijing and a population increasingly resistant to further economic integration with the mainland. Over 70% of all tourists in H113 originated from Mainland China, a revenue stream which would have profound effects on the market should it be reduced or restricted. With regard to the United States, the present currency peg directly links US monetary policy decisions with Hong Kong's own market, making any increase in interest rates even more significant.
- Hong Kong's economy slowed in Q313, with real GDP growth decelerating to a seasonally adjusted 0.5% quarter-on-quarter (q-o-q) from 0.7% in the previous quarter. Unsurprisingly, the main drag on growth came from slowing private consumption and weak exports. Indeed, retail sales have largely been slowing, with growth decelerating from a high of 20.7% y-o-y in April to just 5.1% in September. Diminishing support from the export sector was also unsurprising, given that container throughput has been in contraction for most of 2013.
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