A woman stands in front of glass windows in a building in Hong Kong. Monthly turnover of residential market fell from the peak of 7,700 in May to hit a record low of 3,884 in November. The tally in November was fewer than the 5,177 in May during the SARS period. AFP

Real estate consultancy firm DTZ said that the embattled residential market will bounce back next year. The firm's comment followed news that the transaction volume for the fourth quarter will possibly hit an all-time low since the 1990s.

The monthly turnover of residential market plunged from the peak of 7,700 agreements for sale and purchases (S&Ps) in May to a record low of 3,884 S&Ps in November due to the financial meltdown. The tally in November was fewer than the 5,177 S&Ps in May 2003 during the SARS period.

DTZ head of consultancy for North Asia, Alva To, said that the overall transaction between September and December will drop 35 percent to 15,069 S&Ps from the third quarter, the lowest quarterly record in 18 years.

But he said the market has received support due to the stabilizing flat prices in November, predicting monthly transaction will bounce back to the average level between 7,000 and 8,000 S&Ps in the first half next year. The whole-year transaction volume will stay between 80,000 and 90,000 S&Ps, he added.

To attributed the temporary rebound to the improving affordability, softening property prices and decline in new supply. He predicted that property prices will fluctuate within a five-percentage-point range next year.

However, he said whether the resilience can be sustained in the second half will depend on factors such as employment condition and corporate restructurings.

Compared with the Asian financial crisis in 1997, the current mortgage rates and affordability ratio are relatively low, but prospective homebuyers remained prudent to get into the market on worries of their job securities, he said.

Meanwhile, another realtor, Knight Frank, predicted that local property market will bottom out as early as the middle of 2009. It, however, expected the prices of small- and medium-sized properties and luxury properties to drop another 17 percent.

Speaking about the property investment market, DTZ head of investment (South China) Alvin Yip said that transactions with a price tag over HK$100 million, such as some Grade-A offices, shrank significantly from 310 in 2007 to 176 this year because of the exodus of foreign funds.

Yip said that investors were cautious about the limited loans and funding, and wary of the worsening rental yield.

Among the sectors of property investment, industrial buildings saw the biggest correction in terms of transaction volume, with a 65 percent drop year-on-year, while retail property suffered the least loss declining 5.7 percent.

"Investors remained interested in retail properties," said Yip. "Given the general fall in property prices, some investors hoped to reap the benefits by choosing quality retail premises."

(HK Edition 12/10/2008 page3)