So far this year, numerous news headlines about notable retail property transactions in terms of size, considerations and holding periods have been seen. In fact, between January and October, the number of retail properties that were sub-sold before their original sales transactions were completed (i.e. confirmor sale) surged by 77% y-o-y from that of the same period in 2011 to a total of 488. One might be curious as to which geographical areas have been particularly attractive to speculators, and what is the typical purchase amount involved in these transactions? Let’s take a look.

Last year, core shopping areas (i.e. Central, Causeway Bay, Tsim Sha Tsui and Mongkok) were key areas where confirmor sale transactions (19%) were found. However, so far this year, Tsuen Wan is the dominating area accounting for over 40% of the total. This is mainly driven by the strata-sale of Cube shopping centre in the district. Other than Tsuen Wan, we also saw many sub-sale of retail properties in Yuen Long, Shum Shui Po/Tai Kok Tsui and Sheung Wan/Kennedy Town and Sai Ying Pun.

Geographical Spread of Confirmor Sale Transactions, 2011 vs Jan – Oct 2012

Notes: –
HKI = Hong Kong Island
KLN = Kowloon
NT = New Territories
SW/KT/SYP = Sheung Wan, Kennedy Town and Sai Ying Pun in HK Island
SKW = Sau Kei Wan
NP/QB = North Point and Quarry Bay
SSP/TKT = Sham Shui Po and Tai Kok Tsui
KT/KC = Kowloon Tong and Kowloon City
YMT = Yau Ma Tei
YL = Yuen Long
NT = Tsuen Wan

In general, these areas share one or more of the following characteristics which bring the potential of capital appreciation or higher reversionary yield to buyers:

• A concentration of stratified street shops;
• Presence of urban renewal projects; and
• Upgrading of infrastructure.

A further analysis indicated that the majority of the confirmor sale transactions were in the price range of HKD 1-5 million. This indicates that the ability to purchase shops with a small lump sum, which provides higher liquidity, is significantly attractive to speculators.

Price Range of Confirmor Sale Transactions, 2011 vs Jan – Oct 2012

Source: Economic Property Research Centre

With the launch of QE3 in the US, the more restrictive Special Stamp Duty (SSD) and the Buyer Stamp Duty (BSD) on residential properties in Hong Kong, which shall divert some investors away from the sector, along with limited new retail supply, it wouldn’t be surprising if the number of confirmor sale transactions of retail properties surged further in the near future. However, I am not in a position to support the government’s consideration of imposing heavy regulations which will potentially affect Hong Kong’s reputation as a free economy.

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