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The residential real estate market is booming in both Beijing and Hong Kong, according to the latest report from Jones Lang LaSalle. Beijing’s high-end luxury real estate market is surging thanks to cash buyers, while Hong Kong’s growth remains untamed by the government’s repeated attempts at implementing cooling measures. The measures have had a softening effect on Hong Kong’s high-end market, but growth was still apparent through 2012 as the government attempted to make the market more hospitable to first-time buyers. For more on this continue reading the following article from Property Wire.

Residential property markets in Beijing and Hong Kong are continuing to see robust demand, according to the latest Jones Lang LaSalle Asia Pacific Property Digest.

In Beijing serviced apartment rents increased by 2.8% quarter on quarter in the third quarter of the year and high end apartment sales price rebounded, rising 7.4%.

The report says that in the luxury market the main demand drivers were cash rich buyers who purchased high end apartments to upgrade living conditions or for the purposes of their children’s education.

Inspired by the rebound in the number of units sold in the second quarter of 2012 as well as the good performance in the third quarter, developers of some projects stopped cutting prices and raised asking prices or reduced incentives offered to potential buyers.

Looking ahead to the final quarter, The Imperial Mansion, Beijing Marriott Executive Apartments and Global Trade Centre Serviced Apartment are expected to be completed, offering a combined total of 430 units. It says that robust demand should be beneficial to the new projects, and the average rent should experience an increase similar to that of 2011.

‘It is likely that the number of High end apartments sold in 2012 as a whole will outperform that of 2011. In terms of transaction price, it is expected that the average transaction price will hit end of 2011
levels by the end of this year,’ it adds.

In Hong Kong the new round of cooling measures has failed to dampen market sentiment and capital values have continued to edge higher despite a drop in sales volume.

In an attempt to stabilise home price movements, the government introduced 10 measures aimed at providing adequate housing supply in the market over the short and medium term. ‘However, as the short term measures only consist of about 1,830 subsidised units spread over the next two years and the longer term land supply will take time to complete, the announcement of these measures had little impact on sentiment in the luxury segment of the market,’ says the report.

In addition to the government’s new housing supply measures, the government also further lowered loan to value ratios on new loans for applicants with one or more properties under mortgage for investment purposes, net worth based applicants and those whose principal income is derived from outside Hong Kong.

‘In the current end user driven market, however, the impact on purchasing demand was limited. Market sentiment was largely positive in the third quarter of 2012 despite the number of residential sale and purchase agreements declining by 6% quarter on quarter,’ the report explains.

Demand for luxury properties remained soft with preliminary data showing just 75 properties priced over HK$50 million being transacted, down by 50.7% quarter on quarter but still up 25% year on year.

‘Under the current restrictive measures, transaction volumes are expected to stay at low levels since owners will be less likely to sell because of the potential inability to re-enter the market due to the higher entry costs. Low interest rates coupled with a healthy labour market and a tight supply pipeline, however, should continue to lend support to prices over the near term,’ the report points out.

‘We project luxury residential capital values to grow by 5% to 10% in 2012 and within a single digit range in 2013. Weak demand is expected to continue to drag luxury residential rents lower through the remainder of 2012 though an improved economy from 2013 onwards will help bolster leasing demand and support rental growth,’ it adds.

However, in Shanghai despite demand from first time buyers holding up, due to government support, high end sales momentum has slowed as developers stop offering new discounts.

The sales volume of commodity housing in the primary market rose slightly by 1% quarter on quarter. However, September, a traditional strong season for home sales concluded with only 811,492 square meters sold, significantly lower than in June when sales volume peaked at 1,033,846 square meters.

The high end segment saw sales momentum fade in several projects in emerging areas such as the Xuhui Riverfront. After offering significant discounts in the first and second quarters these projects held prices stable in the third quarter, leading to slower sales.

The report predicts that there could be further efforts by the government to help improve the affordability for first time buyers.

This article was republished with permission from Property Wire.