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Uncertainties, new guidelines hang over Hong Kong’s luxury residential sector

PETALING JAYA: The price growth of Hong Kong’s luxury residential sector is expected to narrow to 5% by year-end as uncertainties and new guidelines might stop people from buying and cause a short-term consolidation in sales volume, Colliers International executive director of residential sales Ricky Poon said.

“With a wait-and-see attitude in making purchase decisions, individual buyers have turned to renters instead, underpinning continued catch up of the residential leasing market,” he added in a press statement dated May 5.

Among several recent announcements the government made that have directly impacted the residential property market includes the new guidelines to regulate the sales of first-hand units.

On the supply front, the government initiated land auctions of two sites in Ho Man Tin and The Peak, and planned to increase supply for small units.

“The government has expressed determination to increase supply in the residential market. Together with the new guidelines on the sales of first-hand units, short-term traders are expected to be sidelined. The cooling effect on the primary market is anticipated to spillover to the secondary market, which eventually results in a short-term softening in general,” Poon added.

In 1Q2010, the transaction volume and turnover of luxury residential properties registered a rebound of more than 50%, Colliers International’s indices showed, but the market experienced a retreat compared with the last year-end.

During the quarter under review, luxury residential property transactions valued over HK$10 million experienced a 31% quarter-on-quarter (q-o-q) drop in transaction volume and a 41% fall q-o-q in turnover.

The q-o-q retreat in luxury residential property transactions valued over HK$50 million, meanwhile, was even more significant, falling 40% in volume and 47% in turnover.

Luxury residential prices and rentals in Hong Kong continued to edge up steadily at the beginning of this year after leading the recovery of the local property market last year. According to Colliers International’s indices, luxury residential prices and rentals both edged up 3% q-o-q in 1Q2010.

Colliers International director of research and advisory Simon Lo said various drivers, including low financing costs, limited new supply and strong buying interest from mainlanders, have underpinned the residential market’s growth during the quarter.

However, the number of sales transactions in traditional luxury residential locations experienced a notable retreat, falling 31% q-o-q during the quarter, he added.

“The buoyant market sentiment has been seeing signs of softening in short term as a number of uncertainties emerge recently. They include the forthcoming interest rate cycle and further credit control in China, thus dampening buying interests in Hong Kong,” Lo noted.

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