16 August 2012
Average luxury residential rent observes similar upward trend albeit at marginal 0.1%
According to Colliers International’s Hong Kong Residential Market Research & Forecast Report 2Q 2012, luxury residential prices picked up its growth in 2Q 2012 after falling for two quarters. Meanwhile, the sales activity also registered an uptake.
The overall number and consideration of sales and purchase agreements of residential units rose 139% and 126% quarter-on-quarter (QoQ), respectively, during the three-month period ending May 2012. Meanwhile, the number of luxury residential sales transactions that fetched over HK$30 million each in the three traditional luxury residential districts, including The Peak, South Side and Mid-levels, experienced an even more significant rise to 170 during the period between March and May 2012 from 32 in the preceding three-month period.
On the financing front, more banks revised their mortgage interest rates downward during 2Q 2012. Individual banks lowered their prime-based mortgage interest rate (P) to P minus 3.1%, which was the lowest level of the reference rate set by the Hong Kong Monetary Authority.
The solid demand coupled with the lowered financing cost underpinned luxury residential prices to pick up its growth after falling for two consecutive months.
“The average luxury residential price in The Peak, South Side and Mid-levels increased 5.3% QoQ to HK$19,723 per sq ft as of May 2012, slightly surpassing the previous peak in 3Q 2011 by 0.5%. The average luxury price growth in 2Q was largely driven by the robust price rise of 8.5% QoQ in Mid-levels,” said Simon Lo, Executive Director of Research & Advisory, Asia at Colliers International.
Meanwhile, luxury homes’ rents also took a pause in declining trend after falling for two quarters. The average luxury residential rent in the three traditional luxury districts edged up marginally by 0.1% QoQ to HK$45.29 per sq ft per month, as at the end of May 2012.
In the three luxury residential districts, the average luxury residential new supply per year between 2012 and 2014 is projected to be 49% below the long-term average of 536 units per year. In particular, the new supply in South Side is extremely tight as the yearly average is expected to be merely 28 units between 2012 and 2014, compared to the district’s long-term average of 250 units per year.
In anticipation of the negative impact by the unresolved European debt crisis and slowing economic growth in China and the measures of increasing land supply initiated by the government, more prospective buyers will stay on the sidelines in the near term. The overall luxury residential price is forecast to fall 13% over the next twelve months.
In the leasing market, luxury residential rents are expected to see downward pressure as multinational corporations, particularly from the banking and finance sector, will remain cautious in hiring amidst uncertain economic environment. Over the next twelve months, the average luxury residential rent is projected to fall 6%.