HONG KONG: The housing market continued to buck the downtrend of the city's economy, with sales of residential units climbing for the third consecutive month in May, according to latest government data.

The number of transactions involving residential units stood at 11,788 in May, up 19.6 percent from April and up 42.3 percent from a year ago, the Land Registry said yesterday.

The total value of residential units that changed hands in May amounted to HK$39.4 billion, up 24.8 percent month-on-month and up 49.9 percent year-on-year, the government agency said.

Meanwhile, the Land Registry said transactions involving all types of building units totaled 13,067 in May, up 17.2 percent from April and 28.9 percent from a year ago.

The numbers represent transactions entered into in the previous month as transaction deeds may not be lodged with the Land Registry until up to 30 days after the transaction.

Housing market transactions have been rising since March in both value and volume terms despite the continued slide of the local economy.

However, analysts are skeptical of the sustainability of the current rally in the property market.

"I am not sure whether the current rally in the property market can be sustained as it diverges very much from economic fundamentals," said Hang Seng Bank senior economist Irina Fan.

She attributes the robust rally in the local housing market to a general bullish sentiment in both the equity and property markets due to the continuous inflow of overseas capital on hopes of an early economic recovery on China's mainland.

Some speculative money is operating in the property market as data from Centaline Property Agency Ltd shows, she notes.

"The performance of the property market leads that of the economy by a big gap," the Hang Seng Bank economist said.

Local property prices have risen by as much as 13.5 percent since the beginning of this year and the monthly number of property transactions has climbed to a 15 month high while the economy is still in a contraction phase, she explains.

"All leading indicators continue to point to contraction," she said, citing declining exports and retail sales and rising unemployment.

The latest PMI data continued to indicate an uptrend in unemployment in the territory, she notes.

"End users will turn cautious and may postpone their home-buying moves as the unemployment rate keeps on rising. The property market can't sustain its rally without a stable rank of end users," Fan said.

With liquidity playing the key factor in supporting current rallies in asset markets, "I cannot be too bullish about the prospects for the housing market in the coming months unless liquidity continues to pour in for some more months", she said.

(HK Edition 06/03/2009 page16)