MAGAZINE 44 MARKET WATCH

Property prices all over Hong Kong are set to soar this year, with buying power boosted by record stock prices and the booming economy. Mainland businessmen looking for local property are also driving demand. As a result, quality residential is at a premium and overlooked areas throughout the territory are about to move up market. One such area is Aberdeen.

Traditionally a poor relation to its more upscale South-Side neighbours, Aberdeen is ideally placed for gentrification. It may not offer the true Island South ambience of beachside living, but it benefits from improved infrastructure, a relatively sleepy village feel and superb harbour views.

In close proximity to the best South-Side schools, notably the Canadian International School of Hong Kong and South Island School, Aberdeen is already a popular district with Hong Kong families. At the weekends, the beaches of Deep Water and Repulse Bay are close to hand, and for those who really like to get away from it all, there are regular ferries to Yung Shue Wan and Sok Kwu Wan on Lamma Island.

More importantly, served by Pokfulam Road and the Aberdeen Tunnel, Aberdeen residents enjoy an easy commute into town. Nam Fung Road connects to Deep Water Bay Road, which also leads into Wong Nai Chung Gap Road for Happy Valley.

The proposed MTR South Island Line (West Section) will only improve the area's accessibility to the Central Business District, and is already having a positive effect on the market.

Prices in Aberdeen began to soar towards the end of last year, triggered by an interest rate cut, and a higher-than-expected land sale in October. K. Wah International Holdings Ltd, Nan Fung Development Ltd and Sino Land Co. paid HK$5.71 billion (more than twice the opening bid), for the 68,921-square-foot Welfare Road site, which faces the Aberdeen Tunnel and Sham Wan yacht dock.

The price exceeded expectation (estimates ranged from HK$3.5 billion to HK$4.4 billion) because the developers plan to build luxury homes. The site is expected to house several high-rise blocks, comprising up to 750 residential units.

The units, boosted by the extremely limited supply in the surrounding area and their excellent sea views, are likely to sell for over HK$16,000 per square foot.

The Welfare Road site was the first government land sale on the South-Side for several years, hence the high premium.

Many buyers chose to enter the market even before the land sale in October, and prices went up by 5 percent across the board. In September, a 1,100-square-foot apartment in South Horizons sold for over HK$6,400 per square foot.

Immediately after the land sale, encouraged by the high price paid for the government land, home sellers throughout Aberdeen raised their prices aggressively. In South Horizons, where around 100 flat-owners raised their asking price, most were asking between 10 and 20 percent more.

One month after the sales, the average selling price of 13- to 16-year-old flats at South Horizons rose a further 7 percent to HK$5,300 per square foot, while that of three-year-old Sham Wan Towers and 28-year-old Aberdeen Centre climbed to HK$5,800 and HK$3,550 per square foot, up 4.8 percent and 1.7 percent respectively.

Over the last few months, average prices for secondary units in the area have risen 15 percent to 20 percent and are expected to continue in an upward trend.

The average selling price of flats in South Horizons is now HK$5,500 per square foot.

Meanwhile, rents at the major housing estates in Aberdeen record an average increase of 69 percent compared to 2003, with an 18 percent average increase in 2007.

It will take time for sales-price increases to filter through to the rental market (since a lease normally lasts two years) but anyone signing a new lease can expect to pay 10 percent to 15 percent more.

In early September, a 967-square-foot unit at South Horizons rented for HK$18,000 per month. Now the asking price is around HK$20,000 per month.

In September, just prior to the land auction, there were about 152 secondary transactions in Aberdeen and Ap Lei Chau — up 111 percent from August. In South Horizons, 97 units changed hands making it the most heavily traded housing estate in the territory. Smaller sized developments also benefited, with units transacted in the Aberdeen Centre increasing from 5 in August to 14 in September.

Due to the steep increase in asking prices, transaction volume fell slightly immediately after the land sale. In November, only around 78 units sold in South Horizons, but flat sales at Sham Wan Towers and Aberdeen Centre remained stable.

While the number of homes changing hands remains slow, there is a clear upward momentum. Sellers are sticking to their asking price, and are prepared to wait for potential buyers to accept the change in the market. After the Chinese New Year, when buying power will be boosted by the annual bonuses, we can expect a lot of market activity in Aberdeen.