Hong Kong property demand spikes, prices expected to rise 10% to 15%

KUALA LUMPUR: Demand for properties in Hong Kong is expected to rise further and prices are expected to rise by about 10% to 15% in the months ahead, according to Colliers International, a global real estate services company.

“Against a backdrop of improving economic fundamentals and positive market sentiment, the residential market anticipates a greater and faster upward trend in 2010,” its Director of Research & Advisory, Simon Lo said at a press briefing in Hong Kong on Jan 19.

The number of sales transactions in December last year rose to 11,112 – a 104% year-on-year increase.

A statement released by Colliers stated that prospective homebuyers are expected to buy earlier rather than later because of the expectations of price inflation.

“Based on stronger GDP growth in 2010, the number of residential sales transactions will see double-digit increase in the first half of 2010 compared to last year,” Lo added.

History supports this forecast – as the overall sales transaction increased during the last upward interest rate cycle between January 2004 and May 2006. Inflation picked up from -1.5% year-on-year in January 2004 to 2.1% in May 2006.

Meanwhile the average number of sales transactions was 9,882 per month, which was 35% higher than in the preceding 12 months before the actual rate rise.

Another factor which will support the expected increase in residential sales is the more relaxed lending policy by banks, the statement said. “The bank’s lending policies have changed from cautious to keen, starting from late 2009,” said its Executive Director of residential sales, Ricky Poon.

Poon added that attractive loan incentives will buoy buying sentiment in the market.

“In the next six months, the number of overall market transactions is expected to be about 10,000 to 10,500 units per month,” Poon said.

Residential prices in the luxury and mass market are projected to grow by 10% to 15% and 15% to 20% respectively, in the next six months, he added.

Its Director of residential leasing, Maggie Lee said that demand on the leasing front has picked up since its trough in 2009. And amid limited residential leasing supply in the market, the upward trend will continue.

Lee added that leasing demand will be sustained by the gradual resumption of hiring by multinational companies like investment banks such as HSBC and JP Morgan, which will be relocating their senior executives to Hong Kong.

“Based on the housing budget of the latest residential leasing clients, most look for accommodation at rentals of HK$30,000 [RM12,991] or less per month while senior executives’ budgets generally range from HK$150,000 to HK$200,000,” she further added.

The statement also said that luxury residential rentals are expected to grow by 5% over the next 12 months.