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Luxury Residential Prices In HK Edged Down

March 22nd, 2012 · No Comments

According to Colliers International’s Residential Market Research & Forecast Report, both luxury residential prices and rents edged down in 4Q 2011 and are likely to witness downward adjustment pressure in 2012.

During the three-month period ending November 2011, the total number of sales and purchase agreements of residential units notably fell by 27.7 per cent quarter-on-quarter (QoQ) to 14,261. This is according to the Land Registry. The overall residential market stayed depressed owing to the government’s resolve to amplify supply, which was announced in the 2011-12 Policy Address, and growing mortgage rates that increased 25 basis points to over 2.5 per cent in 4Q 2011.

In the luxury residential sales markets, Hong kong property buyers were careful regarding future market movement and found it more complex to get hold of funding from financial institutions. As a result, the sales activity slowed with the number of residential sales transactions over HK$20 million (US$2.58 million) and HK$100 million (US$12.9 million) shrinking 51.2 per cent  and 54.5 per cent, respectively, in the traditional luxury districts – The Peak, Mid-levels and South Side – in 4Q 2011.

A softening indication in the luxury residential market was also exposed in the falling prices. “The average luxury residential prices decreased 2.4 per cent QoQ to HK$19,149 (US$2,470) per sq ft in the traditional luxury districts, representing the first dip since 2009,” said Simon Lo, executive director of research & advisory, Asia at Colliers International. “This is largely due to individual landlords lowering their asking prices to push the sale of their properties in 4Q 2011.”

For the meantime, the luxury residential leasing market also slowed in 4Q 2011. As the last quarter of a year is a traditionally low season in the job market which sees slowdown in recruitment and hiring activities, there was a decrease in occupation demand in 4Q 2011 and this translated into decreasing residential rents. The average luxury residential rent fell for the first time since 2Q 2009, down 3.3 per cent QoQ to HK$46.77 (US$6.07) per sq ft per month in 4Q 2011.

With a luxury residential rental fall larger than that of prices, the general luxury residential yield compressed marginally from 2.77 per cent in August 2011 to 2.75 per cent in November 2011.

Looking ahead, the luxury residential market will probably go on to observe compressing factors such as the government’s continual land supply, developers’ watchful attitude in land sales, effective mortgage rate to moving upward to over four per cent, etc. According to Colliers’ research, luxury residential prices are expected to fall by 13 per cent towards the end of 2012. In anticipation of another round of downsizing in individual financial institutions which will ultimately weaken the leasing demand, luxury residential rents are projected to decrease by six per cent towards the year-end.

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