HONG KONG: Measures by the government and banks will lead to a slowing of sales transactions in the short-term, but luxury residential property prices are predicted to increase over the next 12 months, according to Colliers International Hong Kong Residential Snapshot statement on Friday, Aug 20.

"Going forward, the new round of government measures announced in mid-August, including the ban on confirmor deals on uncompleted flats and all buyers to forfeit 10% of price if they pull out of sale, will discourage short-term traders to enter the property market," Colliers said.

"Local banks have become more conservative, tightened lending rules by carrying out stress-test on mortgage applicant's repayment ability and lowering the loan-to-value ratio from 70% to 60% for buyers of home values at HK$12 million (RM4.84 million) or above, so as to prevent excessive expansion in mortgage lending," it added.

As a result of these measures, Colliers predicts that residential sales volume is expected to slow in the short term. However, luxury residential property prices are predicted to increase by 10% over the next 12 months. This is supported by rising inflation and the negative real interest rate environment, said Colliers.

This is on the back of positive market sentiment attributed to good response to land auction result of ex-Valley Road Estate Phase 2 site in Ho Man Tin, which led to an increase in the overall residential sales transaction volume in July, 2010.

"According to the Land Registry, the total number of building unit rose by 33.8% month-on-month (m-o-m) to 14,885 in July 2010 (reflecting mainly sales transactions in June 2010). Sales were predominantly underpinned by the secondary market, up by 51.3% m-o-m," Colliers said.

The University of Hong Kong Real Estate Index Series revealed that its residential index fell mildly by 0.8% m-o-m to 155.2 at end of June 2010.

"The decline was due to the 2.9% m-o-m drop recorded in Kowloon," Colliers shared. "In contrast, several indices compiled by other market practitioners saw a property price increase during the month."

In the primary market, the total number of residential units launched for sale increased by 75.2% m-o-m to 1,253 units in July 2010, Colliers revealed. "The average absorption rate was 45%, which was below the long term average level of 63%. Among the primary launches, The Hermitage of Tai Kok Tsui was 83% absorbed.