Roundup: Analysts bull on HK residential market

Having kicked off the new year with buoyant activities in the first quater, the Hong Kong residential market has showed signs of consolidations in the second quater, however analysts are now expecting another upturn.

"The average price of the market is to rise 8 percent in the later half of this year, and another 10 percent to 15 percent increase in the next year," said Victor Lai, managing director of Centaline Surveyors Limited, a leading real estate research company based in Hong Kong.

The averaged price of building unit transactions has risen 10 percent to 15 percent in the first six months this year. For example, prices at Taikoo Shing, one of the most popular estates in Hong Kong, rose by 66 percent from its low in May 2003 and 23 percent from the start of this year to 4,400 HK dollars (564 US dollars) per square feet (about 0.0929 square meter).

"The Individual Visit Scheme has given and will continue to give impetus to retail sector and thus to benefit the overall economy", James Cheung, director from Centaline Surveyors.

Furthermore, the implementation of the CEPA (the Chinese mainland/Hong Kong Closer Economic Partnership Arrangement) and the promotion of pan-Peal River Delta regional cooperation will continue to propel Hong Kong economy and labor market, he added that these factors are essential for the real estate market to pick up momentum.

The drop of unemployment rate to two-year's low, improvement in deflation, and the rents on the rising trends will give a boost to the residential market, said DTZ, a leading global real estate services company.

According to figures released by Hong Kong Land Registry, one third of the 62,837 transactions in the first half of 2004 are first hand trading, which is at the highest level since 1998.

If the annual first hand transactions in 2004 and 2005 each to be 28,000, about the same level as with 2003, the market will experience an over-demand in 2006, said Victor Lai.

"The HKSAR (Hong Kong Special Administrative Region) government suspended land auction last year, and it will result in a supply shortage in 2006," Lai said. More demand while less supply will sure to drive price up, he added.

"Even pessimistically speaking, if the annual first hand transaction in 2004 and 2005 each to be about 21,000, the market will witness a supply shortage in 2007," he said.

Chueng Yihui, analyst from Hong Kong Midland Property, said the government may resolve the supply shortage by selling more new land or reforming the current "home-ownership scheme." In his idea, the ascending demand curve is due to the economic recovery and increasing of purchasing power. "People are always ready to improve their living standard when they earns more," he said.

Developer's strong confidence toward the residential market over the next two years was shown in the keen bidding and high transaction prices seen in the government land auctions in May and June.

According to the auction prices, the accommodation value of these sites all increased greatly. The Ma On Shan site auctioned in May is to have an accommodation value of 2,773 HK dollars (355.5 US dollars) per square feet, a significant increase of over 90 percent compared with the adjacent site auctioned in 2001, while another site in Kowloon city increased 128 percent compared with an adjacent site auctioned in 2002.

"Thanks to the active residential market with continual rising prices, we believe that the negative residential asset problem will be greatly eased by the end of 2004," said DTZ.

Source: Xinhua