Hong Kong Property Prices May Pop

Property investors seem convinced that the government will not institute further cooling measures in an attempt to mellow prices in the Hong Kong property market, and the sentiment …

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Property investors seem convinced that the government will not institute further cooling measures in an attempt to mellow prices in the Hong Kong property market, and the sentiment has many speculating on a modest increase in prices. Analysts at Knight Frank are projecting a 15% increase by the end of 2012, a statistic bolstered by a 41.7% increase in transaction volume for the month ending at the report’s release in mid-September. Pent-up demand is driving much of the action in part because government plans to increase supply are likely not to have a noticeable effect for year. For more on this continue reading the following article from Property Wire.

Residential property prices in Hong Kong are expected to have risen by up to 15% by the end of 2012, according to the latest housing market analysis from Knight Frank.

Sentiment in the residential market improved in August, as people became more convinced that the government would not introduce major cooling measures, the property firm says in its September 2012 monthly report. It points out that pent-up demand drove up transaction volume by 41.7%, month on month and while prices in luxury developments remained stable last month, those in the mass residential market continued to rise, growing 1.4% month on month, with a number of record breaking deals having taken place.

Examples include a 2,319 square feet duplex in Taikoo Shing, Quarry Bay which was sold for HK$31.4 million, HK$13,540 per square foot, the highest ever transacted price in the development. Meanwhile, a mid-level unit in Block 1 of Metro Harbour View in Tai Kok Tsui was sold for HK$8,553 per square foot, a new per square foot high for the development. In the primary market, new projects continued to receive a positive response last month.

The Met. Sublime in Sai Wan, for example, reportedly sold over half of the 97 units available in three days and The Riverpark in Shatin reportedly sold over 710 of its 981 available flats. A number of new developments are expected to launch in September. These include Century Gateway atop the Tuen Mun MTR station, owned by Sun Hung Kai Properties and Double Cove in Lok Wo Sha, a joint development by Henderson Land, New World Development and Peterson Group.

The report also says that the leasing market stabilised in August, towards the end of the summer peak season, with luxury home rents remaining unchanged. Demand from multinational corporate tenants was still impacted by uncertainty in the global economy.

At the end of August, the Hong Kong government announced ten measures to increase housing supply in the short to long term. Major measures included the sales of 830 Home Ownership Scheme (HOS) units in Tin Shui Wai early next year, putting 1,000 flats in Tsing Yi up for sale at a discount under the My Home Purchase Plan and speeding up the approval process for pre-sale flats.

‘We believe the increase in supply will contribute to the healthy growth of the market in the long term. However, the immediate impact is limited, as only about 1,000 units will be added to the market in the short term,’ says the report.

The government’s measures for increasing housing supply will take years to realise. In the near term, favourable factors, such as limited new supply, low interest rates and low unemployment levels, will prevail, it explains.

‘We have therefore revised our forecasts and expect luxury residential prices to rise by up to 10% by the end of year, while mass residential prices could increase by up to 15% over the same period. However, a price correction could be witnessed from 2013 onwards, when supply starts to increase notably,’ it concludes.

This article was republished with permission from Property Wire.

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