Lefang report: The rental increase of Grade A office buildings in Central Ring Road has accelerated, with a year-on-year increase of 6.0%.

The latest "Hong Kong Monthly Property Market Report" released by Leung Fong indicates that the rental increase rate of prime Grade A office spaces in Central has accelerated, rising by 6.0% year-on-year and 2.8% from the beginning of the year. The demand for high-quality office spaces in core locations remains resilient, reflecting the market's continuous need for such properties. With the challenging external environment, Middle Eastern capital and family offices are expected to diversify their investment portfolios further into other major regions in the Asia-Pacific, including Hong Kong. This trend is expected to support the demand for small-sized Grade A office spaces. Due to the Lunar New Year holiday, the overall market activity in Kowloon remained quiet, with limited transaction volume. Yau Tsim Mong continues to be the preferred location for companies upgrading their office spaces, while Kowloon East has seen ongoing relocation and lease renewal activities. A European insurance company has leased a 100,000 square feet space at IGC in Kowloon Station. The existing and potential tenants at IGC are mainly from the banking, finance, insurance, and professional services sectors, with these companies actively seizing opportunities in the mainland market while being able to afford relatively higher rents. In February, there were 4,109 transactions of first-hand residential properties, rising by 146.3% from the beginning of the year and surpassing the full-year level of 2024. Second-hand residential transactions also reached 8,229, up by 59.5% from the beginning of the year. The total number of residential transactions stood at 12,338. In the luxury property market, despite the announcement in the Budget that the stamp duty on residential properties exceeding HK$100 million has been raised from 4.25% to 6.5%, the impact of this measure on the overall transaction volume is expected to be limited as luxury buyers are less sensitive to stamp duty. The luxury property market remained active in February. The residential rental market near universities continued to show strong performance. The severe shortage of supply of student housing from schools and private dormitories continues to attract investors seeking stable rental returns. In January, Hong Kong's retail sales increased by 5.5% year-on-year, marking the ninth consecutive month of growth. Sales of jewelry, watches, and valuable gifts surged by 31.1%. The increase in the number of tourists during the nine-day Lunar New Year holiday is expected to further improve retail performance in February. During the period, there were 1.77 million visitors to Hong Kong, up by 14% year-on-year, with around 1.5 million visitors coming from the mainland. Tourism-related consumption continues to support local brands. Overall, the local consumption sentiment in Hong Kong remains cautious, with ongoing closures in the food and clothing industries and limited intentions for new shop openings in the short term. The persistent unfavorable external factors in the Middle East region may affect travel plans to Hong Kong. However, this may also lead local residents to reduce overseas travel and opt for short-haul trips, thereby supporting the performance of the local retail market.