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South-Side sell out
Transactions are up in Island South, as prices continue to soar. Jane Drew reports
‘‘Since January, it's been easier to sell and rent properties on the South-Side, as not so many landlords are playing games'' Judy Chai, executive director at Sallmanns Residential
Playing the property market is all about taking risks and knowing when to make your move. As with the stock market, it takes skill to know when to buy and when to sell, and it helps if you're a gambler at heart. Certainly all those with a feeling for the game, who bought property in Sars and knew just when to sell it, made a mint. After the fact, the rest of us wonder why we didn't take the risk too… but it's the ability to predict the market (and the confidence to rely on a hunch) that separates the property moguls from the rest of us.
So the question is, right now, when property prices are high, and concerns about inflation are just starting to creep in, would you choose to sell your property? Or would you decide to sit on your investment, banking on the fact that Hong Kong will remain stable economically at least in the medium term?
According to Judy Chai, executive director of Sallmanns Residential, Island-South residents, at least, are choosing to do the former. "Since January, it's been easier to sell and rent properties on the South-Side, as not so many landlords are playing games. They are not waiting for prices to sky-rocket further; they are prepared to enter into transactions now." And it's easy to see why.
Over the past three years luxury premises on the South-Side have appreciated 60 percent (compared to a slower rate of 45 percent on the Peak). In the first quarter of 2007, the average sales price was HK$10,361 per square foot (compared with the HK$6,482 recorded in the first quarter of 2004). And prices have risen steeply in the past six months, as the property market has caught up with the stock market.
"But we're no longer in a honeymoon period," Chai says. "Only 50 percent of landlords continue to be bullish, the rest are concerned about negatives like the US economy, stock market and subprime. There are fears that there may be a recession, and so people are choosing to strike while the iron is hot."
Additionally, people whose properties have appreciated sizeably over the past few years are now looking to sell, or have already sold, in order to upgrade. Those who need funds in order to pick up a better property for themselves aren't prepared to sit on empty flats waiting for buyers to accept off-the-scale prices.
From a buyer's perspective, all this is clearly a huge plus: the market is moving much faster than it was even towards the end of last year.
Rising rentals
Many South-Side landlords who previously rented their properties are now choosing to sell them in order to take advantage of the current prices. But those who persevere with rental properties are also cashing in.
Now tenants are looking at paying between HK$43 and HK$55 per square foot for houses, and between HK$30 and HK$57 per square foot for flats. The average South-Side rental was HK$34.67 per square foot at the end of the first quarter of 2007. This is an increase of 43 percent compared with the first quarter of 2004, when it was HK$24.27 per square foot.
"Rents have been going up gradually since this time last year," says Maureen Mills, executive director of Sallmanns Residential. "A good-sized four-bedroom flat used to rent for HK$70,000 or HK$80,000, now you are looking at HK100,000. In 127 Repulse Bay, flats are renting for HK$170,000, last year it was HK130,000."
Dwindling supply
Island-South rates alongside The Peak, Mid-Levels and Jardine's Lookout as one of Hong Kong's most prestigious residential districts. As with all these areas, demand for housing is steady with residents attracted by the good tenant mix, country lifestyle, and proximity to international schools, shopping centres and leisure facilities. Importantly too, from just about anywhere on the South-Side (Repulse Bay, Deep Water Bay, Stanley and Shek O), it's a mere 15- to 20-minute drive through the Aberdeen Tunnel to Central.
Prices continue to rise because in this relatively small area supply is seriously limited. "There's not much available to buy or lease in the main developments in Stanley and Repulse Bay at the moment," says Mills. "There are waiting lists, and you have to move fast if you want a property. Right now there are two places in Hong Kong Park View, one vacancy in Grand Garden and nothing in either Fortuna Court, The Repulse Bay or Repulse Bay Apartments."
Since the government is not selling any new land, there's not much new supply coming on stream, though Mills expects the present situation to ease slightly over the course of the year.
"At Carmina Place there will be 56 units in two fourteen-storey blocks, and we can expect two low-rises at Headland Drive," says Mills. "There's the refurbishment of the Belgravia, and South Bay Close is also coming in the next few months."
Supply is notoriously limited in Island-South because residents are chiefly confined to high quality detached or semi-detached houses, townhouses and low- to medium-rise apartment blocks. There are height restrictions on all properties facing the sea and also government rulings associated with the Green Belt and coastal protection.
Interestingly though, in this seaside area, flood zones are yet to be factored in. In the US, the Federal Emergency Management Agency (FEMA) issues Flood Insurance Rate Maps which show areas that have a 1 percent or greater chance of flooding, and buyers are increasingly unwilling to look at properties within the flood zone. There seems to be no demand for such statistics in Hong Kong but should they come on stream it may mean that South-Side properties suddenly become as cheap as chips.
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