Hong Kong residential market to pick up in 2H2010

PETALING JAYA: The hold back in the primary sales market in Hong Kong will result in an overall slowdown in residential sales volume in the short run, according to Colliers International (Hong Kong) Ltd's latest residential snapshot report.

It noted that luxury residential rental is expected to pick up at a faster rate in the second half of this year, in anticipation of a sustained economic recovery, rising occupational demand and an inflationary pressure.

"This, in turn, will lend support to property prices. Supported by a low interest rate environment, luxury residential property prices are predicted to increase by 10% over the next 12 months," it added.

The number of residential sales transaction in Hong Kong experienced a contraction in May 2010, due to the growing uncertainties in the prevailing European debt crisis and a new set of measures on new flat sales in Hong Kong, Colliers International said.

"According to the Land Registry, the total number of building units fell by 6.8% month-on-month (m-o-m) to 13,067 in May 2010. Meanwhile, the number of primary residential sales saw a significant decline of 65.3% m-o-m to 685 units in May," it added.

Residential property prices across the board also witnessed a slower growth momentum during the month. Although Hong Kong's liquidity level was reduced to HK$149 billion (RM62 billion), it remains plentiful in the Hong Kong banking system, compared to the long term average of HK$28 billion.

Quoting the University of Hong Kong Real Estate Index Series, Colliers International noted that the University of Hong Kong All-Residential Price Index increased 1.4% m-o-m to 154.6 as at the end of April, after a 2.5% m-o-m growth in March.

In the primary market, the number of residential units launched for sale in the primary market between May 16 and June 15, 2010 decreased by 7.9% to 665 units, as compared with the previous one-month period ending May 15. The average absorption rate was 50%, which was lower than the long-term average of 65%.

"Among the primary launches, Festival City (Phase 1) in Shatin was 100% absorbed," the research house added.