UBS Hong Kong Property: Slowing Momentum in April Retail Sales
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UBS highlights a slowdown in Hong Kong's retail sales momentum, which grew just 1.2% year-over-year in April, a notable deceleration from March's revised figure of 2.5% and falling short of the market consensus estimate of 1.8%. The report attributes this weakness to a high base comparison and tepid consumer confidence. In the office sector, Central Grade A office rents continued to face downward pressure, declining 0.5% month-over-month and 3.2% year-over-year, pushing the vacancy rate up to 9.8%. The office market is projected to grapple with oversupply, with new completions expected to peak in the second half of 2026, ensuring prolonged rent pressure.
Conversely, retail shop rents saw a slight 0.3% month-over-month uptick, supported by ongoing tourism recovery. Visitor arrivals increased 8% year-over-year in April, though per capita spending declined. This slowdown in retail sales could constrain future rental growth for retail spaces. In the residential sector, transaction volume dropped 15% month-over-month in April due to elevated mortgage rates, though the price index remained stable month-over-month, rising 2.1% year-over-year. UBS maintains a Neutral stance on the broader Hong Kong real estate sector. Developer stock prices already reflect most negative factors but currently lack distinct positive catalysts.
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