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Predictions for the Year of the Tiger
What lies ahead in the Year of the Tiger? Will it roar or purr?
We asked eight property experts to give us their predictions for Hong Kong’s residential property market over the next 12 months.
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Interviewed by Apple Mandy
Anne-Marie Sage
Regional Director for Residential Jones Lang LaSalle
In 2009, luxury capital values went up 8.8 percent in the third quarter and 2.3 percent in the fourth quarter. Overall, the luxury capital values went up approximately 28.9 percent last year. Meanwhile, luxury rentals went up 1.1 percent in the third quarter and 3.2 percent in the fourth quarter of 2009, this followed a 10.7 percent fall in the first half of the year.
The overall capital values in the luxury residential market is looking optimistic because it is estimated to rise by 40 percent over the next three years compared to mass market values going up by only 15 to 20 percent. We’re expecting a 10 percent leasing growth in luxury rents in 2010, and 15 percent for both 2011 and 2012.
There were a lot of cutbacks in financial companies bringing families into Hong Kong at the end of 2008 and early 2009. But this year we expect to see an increase of families coming into Hong Kong. Thus the residential market will pick up throughout the year.
Louise Chan
Director of the Residential Department Centaline Property Agency
There is a positive outlook in the property market this year. There is likely an increase in salaries and that means residents will be more confident to buy properties. Once their income becomes stable, there will be higher spending power.
Middle-class citizens will be potential buyers. Mainland Chinese will choose to buy super luxurious houses. Mid price apartments that cost HK$5M to 10M will be hot in 2010 because of the low interest rates. So it’s more practical to buy an apartment than to rent.
We predict that Kowloon will be the popular choice for both mid price and luxury property buyers. Properties locating between Kowloon and Olympic station have already constructing five developments four years ago, plus there are 1,000 to 2,000 units on each site ready to launch in 2010. Western New Territories and West Kowloon will be popular for luxury properties too.
Carol Lai
Vice-President for the Residential Real Estate and
Relocation Division Asia Pacific Properties
Due to present low interest rates and strong demand from the “cash-rich” sector, we would not be surprised to see prices go up by 10-15 percent in the mass and 20 percent in the luxury sectors during the Year of the Tiger. The concern about overheating markets in China may also bring new funds to Hong Kong property as our market is generally considered a “safe” long-term investment.
The rental market for luxury homes is expected to outperform the mid-range as supply is tighter. This is because many luxury home owners opted to place their properties for sale rather than for lease during the market boom. But this is not necessarily because there is a greater interest in the luxury market – as always, decisions are based on how much the investor can or is willing to spend.
Recent transaction volume indicates that many bought properties in 2009 and current interest indicates that potential investors are still out there looking. There are a number of factors. The main reasons are probably comparatively low interest rates and banks having a less tight lending policy (than they did 14 months ago). Hong Kong’s economy returning to growth, albeit moderately in historical terms, is not dampening interest either.
Nicholas Brooke
Chairman
Professional Property Services Group
I think it is likely that the exuberance displayed by the residential market in 2009 will run on for the first few months of 2010, with values continuing to trend upwards in the urban area and trophy prices being paid for high profile, highly promoted flats and houses.
However Hong Kong is not isolated from external forces, particularly adverse news from the United States and Europe, and is very dependent upon the engine of growth in mainland China. In the case of the United States and Europe, there is undoubtedly more pain to come, as banks seek to address huge portfolios of commercial loans that are no longer covered by the value of the assets secured against them. Similarly, governments are going to have to start to recoup monies outlaid in their stimulus packages. In the case of the mainland, attempts to rein in the property sector could derail Beijing’s wider growth agenda.
All this will impact Hong Kong and the residential sector. As a result, we are likely to see a year of two halves, with a very bumpy second half. Property values will at least hit a plateau or at worst see a market correction of 10% to 15%. Fortuitously, any correction will be cushioned by the tight supply situation, which continues to motivate most purchasers.
Victor Lui
Executive Director
Sun Hung Kai Real Estate Agency
Last year we have witnessed the luxury market trigger a rebound in the local residential market. Luxury properties will continue to be backed by limited supply and low mortgage rates. We have also discovered that most purchasers are currently not applying for maximum mortgage financing of 70%. Instead, they are planning to borrow only 50% of the purchase price or lower, and quite a number of them do not need any financing at all. So we can see that the financial strength of home buyers is now very strong. That means the market is very healthy.
While deposit rates are also extremely low, property investments remain a clever choice to put our money into when compared with other financial instruments and even the stock market.
This year, the residential market will continue to be buoyed by an inflow of liquidity. With the luxury leasing market also showing signs of full recovery, the current property rally should be sustainable over the course of this year.
Victor Tin
Deputy General Manager for Leasing
Sino Group
The luxury residential market is expected to continue its stellar performance in both activities and rentals in the Year of the Tiger, with estimated growth of 10% to 15% in rentals.
With companies on the hire in anticipation of further business growth in mainland China and elsewhere in Asia, we expect more senior expatriate arrivals from both the finance and non-finance sectors, boding well for the leasing market. A steady influx of expatriates from overseas has also fuelled the demand for luxury rental properties.
The 10 new infrastructure projects slated to kick off this year will drive accommodation demand in the New Territories. Developments in convenient locations such as the Gold Coast Residences have already seen strong demand for serviced apartments by major construction companies, which have taken up leases in blocks of 10 to 30 units.
Another good example is Bowen’s Lookout on Victoria Peak. The development comprises 26 luxury apartments, each occupying a single floor. The 2,388-square-foot apartments are leasing at $108,000 per month and rents are expected to reach $120,000 per month by the summer of 2010, an 11% rise.
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