Two transactions on the south side of Hong Kong Island raised a lot of eyebrows last month when houses at 6 Stanley Beach Road, a China Overseas Land & Investment development, were sold at record prices for Stanley.
House 6, a 4,242 sqft property, fetched HK$212.5 million, or HK$50,094 per square foot. Two days later, House 1, a 5,221 sqft property with a 4,400 sqft garden, went for HK$328.6 million, or HK$62,000 per square foot.
Although the market has slowed down in terms of transactions, prices on the south side of the island are still on fire. Brokers attribute the interest to mainland buyers.
'I don't think local people would offer those prices,' says Henry Fung King-kuen, a broker with Midland Realty's Shouson Hill office. 'It surprised house owners in the area too.'
Average prices for luxury properties in the area are running at HK$23,534 per square foot, so they are still lagging behind The Peak, but not by much.
The Peak is averaging HK$24,088 per square foot, only a difference of 2 per cent, according to Knight Frank.
What's more, the south side is gaining fast, up 22.3 per cent in the first two months of this year, while The Peak moved ahead 16.2 per cent. However, newer developments on the south side have been changing hands more quickly than properties on The Peak, where colonial mansions tend to stay under the same ownership for years.
New projects include 37 Island Road, where developer Chuang's Consortium International has built four houses. Three have been sold, with House B, a 7,000 sqft home, fetching HK$440 million in January in a sale to a cross-border businessman trading on the mainland. House C sold in December for HK$435 million. Each home has its own garden, swimming pool and sea view.
Another transaction in that development matched the record price in Stanley of HK$62,000 per square foot.
'Demand is quite keen right now but supply is quite limited,' says William Lau Man-wa, sales director for Island South at Midland Realty.
'So prices are going up, especially for single houses, one-lot houses and even town houses.'
Sun Hung Kai has built 31 homes at its Shouson Peak development on Shouson Hill. Those properties are on the market at an asking price of about HK$45,000 per square foot, or about HK$180 million for a 4,000 sqft home.
The stream of restrictions on buying mainland property may be driving buyers into Hong Kong.
'When people have cash to move out of the mainland, Hong Kong is one of their target places, as well as Taiwan and Singapore,' says Terri Lai Tak-yee, associate director for The Peak and south side at Centaline.
'It's close and they're more familiar with the area.'
A downturn in the mainland economy could hurt prices in luxury neighbourhoods. Since the tycoons buying such homes have wide-ranging business interests, they are exposed to major economic shifts further afield.
'If the economy goes down, they would rather hold cash than properties,' Lai says. 'Those people are affected by the global economy.'
The price surges of the past two years, which have seen property rise by 50 per cent across Hong Kong and much higher in the most luxurious neighbourhoods, are a concern. 'Of course it's not healthy, but the market keeps going on,' Lai says.
The market has slowed recently because it is hard to persuade owners to sell properties when they expect further gains. Agents say they struggle to get owners to commit to a sales price. Lai says he hopes the prestige of The Peak and the island's south side may protect them if there is a downturn, compared with newer neighbourhoods such as West Kowloon.