The luxury retail sales decline in Hong Kong brought on by lackluster mainland Chinese tourist numbers is set to carry on through 2016, according to a new report. The report by commercial real estate services firm CBRE called 'Hong Kong Commercial Real Estate Review & 2016 Preview' predicts that prime high street retail rents in Hong Kong will have declined by 20 percent by the end of 2015, and will drop a further 10-15 percent in 2016. As Chinese tourist numbers have dropped, luxury boutiques have been hit the hardest in an ongoing retail slump this year.
According to a previous CBRE report, Hong Kong’s implementation of the 'individual visit scheme' in 2003 led to a 'Golden Decade' for retail sales. Mainland Chinese tourists flocked to Hong Kong to take advantage of lower taxes, a favorable currency situation, wider selection, a good market reputation, ease of access, and language convenience. Tourist arrivals soared by 292 percent, prompting retail sales growth of 185 percent and overall retail rent increases of 213 percent. But this period has now ended, with sales of jewelry and watches down 14 percent in 2014 and 15 percent in the first seven months of 2015. This is due to China’s anti-corruption campaign, slowing economic growth, anti-mainland hostility, and travel and tax policy changes. Furthermore, other destinations including Japan, South Korea, and Europe are heavily competitive with Hong Kong thanks to currency fluctuations, easier access due to direct flights, and strong marketing efforts to attract Chinese travelers.