Real estate firms predict another solid, albeit slower, year of growth

Hong Kong's property market is set for another strong year of growth in 2011 after short-term consolidation, albeit at a slower rate, the city's major real estate firms predicted Thursday.

Meanwhile, investor focus is likely to shift from the residential sector to a commercial market that is predicted to be the more lucrative in the coming year.

In regard to the latest round of tightening measures targeting speculators in the property market, Alva To, DTZ's head of consulting in Greater China, said that "market sentiment began to change recently. Mass home prices started to show signs of softening in November as some sellers offered a more realistic asking price. Luxury residential is also subject to the impact of fewer transactions, although the price is still supported by a very limited supply."

Stephen Chan, managing director at Savills, observed that after the government's punitive stamp duty took effect, transaction volume in the mass market segment plunged 20 to 25 percent. However, downward momentum has shown signs of easing during the past two weeks and Chan predicted that investors and end-users will gradually digest the measures, nudging up transaction volume and prices - especially in the mass market.

Colliers International, meanwhile, sees short-term consolidation, expecting a 5 to 10 percent fall in the average price over the next three months, due to the government's recent anti-speculation measures. Ricky Poon, executive director of residential sales at Colliers said "this short-term consolidation can be a buying opportunity for end-users and upgraders who will hold the property for self occupation."

In the short term, DTZ's To forecasts home prices to fall by 10 percent and thinks that the ultimate direction of the market will depend on the government's attitude as we move on to 2011.

After double-digit price growth in the residential sector, especially the luxury segment, major real estate consultancies foresee pared down growth for the coming year. For luxury residential property, Savills predicted a 5 percent price increase while Colliers predicted 8 percent growth.

Looking into 2011, the story for commercial properties, especially the office segment, may prove to be more exciting - a view shared by real estate service providers.

According to Alvin Yip, DTZ's co-head of investment in China, the share of luxury residential transactions in recent months shrank from 26 percent in the third quarter to 17 percent in the fourth quarter, after the office and retail segments.

"A continued positive outlook of rental growth spurred by positive economic development made the office sector attractive to many investors as they looked for value-added investment opportunities," said Yip. "Office is expected to remain popular among investors as it has a better yield prospect over retail, its price gain has lagged behind luxury residential, and most of all it is subject to fewer regulations and market fluctuations."

Simon Lo, research and advisory director at Colliers, said expansionary leasing demand will be driven by the financial sector, with private equities and overseas legal firms to be newcomers in the central business districts (CBDs).

Savills expected overall grade A office rents to increase 25 percent in 2011 and prices to increase 20 percent. Colliers, meanwhile, forecast the figures to be 17 percent and 14 percent respectively.

China Daily

(HK Edition 12/15/2010 page2)