Cushman & Wakefield's Response to Budget 2023/24

HONG KONG SAR - Media OutReach - 22 February 2023 -

Response to Budget 2023/24 by Mr KK Chiu, International Director, Chief Executive, Greater China of Cushman & Wakefield:

Land policy

Housing has always been a major concern for Hong Kong citizens, Cushman & Wakefield is pleased to see the Government is actively creating land to increase the land supply in the market. As mentioned in the Budget, 12 residential sites are covered in the 2023-24 Land Sale Programme, and it is estimated that the potential land supply for the whole year will provide 20550 units. However, in view of recent failure of Government land sales bids, Cushman & Wakefield suggests that the Government review standard land price and bidding price to make sure they are on par with market situation.

Cushman & Wakefield agrees that the Northern Metro Area is a new engine for the future development of Hong Kong. To accelerate the development of the area, we suggest that the Government set up phased indicators for new development areas in Yuen Long South and Hung Shui Kiu in order to speed up their planning and development. We also suggest that the Government prioritise on land consolidation and planning of industrial park construction.

Light Public Housing

The Government has identified 8 sites for the construction of Light Public Housing, Cushman and Wakefield agrees this measure could fill the short-term gap of public housing supply. At the same time, in order to address the public's concerns over recovery of land designated for light public housing, we suggest that the Government publish a clear timeline for land recovery, and may consider putting some of the light public housing sites on the land requisition list. This will convey a clear message to the market that "the sites currently planned for the light public housing are only temporary", thereby giving the public confidence that the sites will be put back on the market again in the near future.

Response to Budget 2023/24 by Mr John Siu, Managing Director, Cushman & Wakefield Hong Kong

Logistics land use

With the Financial Secretary proposing in his Budget Speech to further promote Hong Kong as an international maritime center and a "smart port", Cushman & Wakefield believes that more logistics sites will need to be reserved to support import/export and storage of goods in the future. We suggest that the Government could consider relocating the existing brownfield operators to suitable logistics sites in the Northern Metropolis, to better consolidate and enhance the land usage within the area.

Nevertheless, land sales driven by public tenders might push up development costs and rents, making them less affordable for the existing brownfield operators. Currently, warehouse rents in Hong Kong increase annually by around 5%. Whilst the monthly rents of modern multi-story warehouses/industrial buildings range between $12 and $17 psf (in terms of GFA; efficiency ratio around 50% to 70%), those in brownfield sites in the New Territories range from $13 to $15 psf (in terms of saleable area), creating a rental gap of around 50%.

Data Center

We are pleased to see the Government committing resources and introducing various measures to promote the development of smart cities and a digital economy. The data center industry is one of the cornerstones of Hong Kong's digital economy, and we suggest that the Government should adopt a progressive approach and release data center sites, of about 200,000 to 300,000 sq feet, in popular data centers areas, such as Kwai Chung, Tsuen Wan, Tsing Yi, Sha Tin, Fanling and Tseung Kwan O, every one to two years according to the market demand-supply dynamics, to attract more data center operators to set up in Hong Kong and develop Hong Kong into an international data center hub.

We also advise that the Lands Department should consider waiving the requirement to build a public car park in the Conditions of Sale for data center sites. The government departments should also liaise in advance with the power supply providers to ensure sufficient electricity supply for the site, so as to enable the data center to have a reliable and stable supply of electricity upon completion.

Response to Budget 2023/24 by Ms Rosanna Tang, Executive Director, Head of Research, Hong Kong of Cushman & Wakefield:

Housing market prediction and stamp duties

Cushman & Wakefield supports the Government's adjustments to the value bands of the ad valorem stamp duty(AVD), easing the burden on ordinary families and first-time buyers on purchasing their first residential properties through the broadening of the AVD (Second Standard Rate) bands, particularly small and medium residential units under HK$ 10 million. Although house prices have experienced a downturn over the past three years due to the on-going pandemic, with resumption of cross-border travel between Hong Kong and the Mainland this year, it is expected that both the macro-economy and buyer's sentiment will improve. We had noticed a gradual pick-up in house viewings and transactions in the market. With the Government's adjustments of the AVD, Cushman & Wakefield is expecting the overall property prices will rebound by 5-10% in 1H23.

Response to Budget 2023/24 by Mr Kevin Lam, Head of Retail Services, Hong Kong of Cushman & Wakefield:

Digital Consumption Voucher

We are pleased with a re-run of the consumption voucher scheme which will give a boost to local F&B and consumption and speed up the recovery of the retail market.

International events to attract visitors could help reviving the shop market

As Hong Kong and the rest of the world lift all travel restrictions and gradually ease pandemic measures, Cushman & Wakefield supports the government in setting aside $100 million for holding more megaevents to attract visits and promote tourism in Hong Kong, and the Hong Kong Tourism Board to spend more than $250 million to continue to organise and promote the megaevents. We remain conservative yet optimistic about retail rent this year but will need to evaluate changes in the spending pattern of mainland and overseas visitors. We expect more apparent changes in retail rent in 2H23.

Promote Urban Sports

We are pleased to welcome the government's support for the further promotion of urban sports. The number of 24-hour fitness centres has doubled to over 100, and the number of private indoor climbing centres has increased to over 20 last year. Many shopping centres have added skateparks, climbing walls and running facilities to attract visitors. The government's increased support is in line with the national extensive mass fitness program, it also provides a good basis for the diversification of Hong Kong's shopping malls, adding a new perspective that Hong Kong is a healthy and energetic tourism option to attract overseas visitors.

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