HONG KONG: After a roughly 30 percent increase in Hong Kong residential property prices this year, developers can expect additional gains in 2010 on the hope and strength of strong capital flows into the city.

Lee Shau-kee, chairman of Henderson Land Development, predicted yesterday that home prices will rise another 10 percent next year, following this year's jump.

Such positive expectations are prompting Lee to spend HK$10 billion on property in the next two to three months and anther HK$10 billion on land premiums for the company's Wu Kai Sha project.

He said at a news briefing yesterday that he has been selling other stocks, but bought about HK$5 billion worth of shares in real estate companies since the Hang Seng Index reached 20,000 points, believing property-related stocks will be fueled by strong liquidity.

"The property markets in the US and Europe have already suffered from a bursting of a price bubble. Capital has nowhere to go now but to flow to Asia, and Hong Kong will be the beneficiary," said Patrick Chow, the research head of Ricacorp Properties, a large property agency, who added "we could see prices rising by more than 30 percent next year."

A sharp bounce in housing prices this year triggered a public outcry and the SAR government was urged to increase land supply and review regulations on property sales.

However, top executives at another leading real estate company said the home prices are "reasonable".

"Residential prices in Hong Kong are reasonable now, especially since mass market residential prices are still around 30 percent lower than the peak in 1997," said Raymond Kwok, vice chairman of Sun Hung Kai Properties.

Sun Kung Kai, Asia's largest property developer by market value, set in September an apartment sales target of HK$23 billion for the year 2009-2010, higher than the previous goal of HK$20 billion for 2008-2009.

"We are cautiously optimistic" about the Hong Kong residential market in the coming year, said another vice chairman, Thomas Kwok, at a press conference yesterday.

Sharply growing property prices may lead to asset bubbles, but "bubbles won't be bubbles until they burst," said Shih Wing-ching, chairman of Centaline Property Agency, one of the largest property agencies in Hong Kong, in an interview with China Daily earlier.

Apart from liquidity, low borrowing costs are believed to be another growth driver. Mortgage brokers expect new home loans to reach HK$238 billion next year, a 19 per cent increase on this year and the highest since the HK$256 billion total at the market peak in 1997.

(HK Edition 12/04/2009 page1)