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HK luxury, mass residentials on upswing in 2011

KUALA LUMPUR: Hong Kong's luxury and mass residential property transactions are experiencing an upward trend after recovering from a dip in November last year, stated Knight Frank in its January 2011 monthly property report.

"The quick revival was attributed to the fading impact of the new measures, on the back of sustained favourable environmental factors, including low interest rates, limited housing supply and continual capital inflow," Knight Frank said.

Knight Frank indicated that transactions fell when the government regulatory policies stepped, such as the imposition of a special stamp duty and the lowered maximum loan-to-value ratios, which affected market sentiment hence low transaction numbers.

In the luxury sector, the market was supported by sustained demand from cash-rich homebuyers and long term investors that registered a number of record-breaking transactions last month. For instance, in Island South, House C at 37 Island Road sold for HK$435 million (RM170.95 million) or HK$62,143 psf.

The mass residential market also saw buyers returning with fears that prices will increase after the Lunar New Year. Units where potential buyers withdrew thus forfeiting deposits have been resold at higher prices. For example, a unit in Kingswood Villa in Tin Shui Wai was resold for HK$2.23 million, compared to the previous transaction price of HK$2.2 million.

"In 2010 overall, luxury residential prices surged 14.5% with Mid-Levels [district] experiencing the most noticeable price increment of 20.4% and Island South coming second with an 18.6% gain," said Knight Frank. "Meanwhile, mass residential prices increased about 20% over 2010."

On the flipside, Knight Frank noted that the leasing market has stagnated over the past month due to the traditional slow season.

"An increased number of flats available for lease under the new regulatory policies dragged down rents in some luxury residential developments, but overall, luxury residential rents continue their uptrend, rising 0.8% month on month," Knight Frank said. "Meanwhile, mass residential rents dropped about 2% in December."

A number of major launches are slated for 2011. There is Phase 3, Lohas Park with 1,648 units; Pak Shek Kok project with 1,235 units; Phase 2C, Lohas Park with 1,168 units; and Area 56 development with 1,028 units.

"Despite improved market sentiment and the increase in primary supply, sales transaction volume in the first quarter is expected to be lower than that in the last quarter of 2010," Knight Franks surmises. "We maintain our forecasts that residential sales volume in 2011 could fall by 35%, but the average home price is expected to grow 5" to 7% over the year."
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