Hong Kong has jumped two places to become the third most expensive city in the world for luxury apartments after a sharp rise in prices this year.
The latest survey by Global Property Guide, a US online property research website, put the average price of luxury apartments in Hong Kong at US$1,893 (HK$14,674) per square foot in November.
The world's top-priced city was Monaco, where the average price of a luxury apartment was US$4,864 per sq ft, followed by London at US$2,396 per sq ft.
In January, Hong Kong was ranked the fifth most expensive city for luxury flats, at an average price of US$1,373 per sq ft.
The rise in the rankings follows a 10.4 per cent average jump in luxury residential prices in Hong Kong from the fourth quarter last year to the third quarter this year, according to the Rating and Valuation Department.
The outlook for the sector for the remainder of the year has been clouded by the introduction last month of a 14 per cent stamp duty for non-resident and corporate buyers and the extension of a special duty on quick resales.
Until these measures were brought in last month to curb property speculation, about 40 per cent of buyers in the luxury residential market were mainlanders, Simon Lo Wing-fai, a director of research and advisory at Colliers, estimated, but the stamp duty on buyers had begun dampening demand among both mainland and other foreign buyers.
"Sales of luxury flats dropped sharply after the new measures were released," said Lo. "But if the appreciation in the yuan continues, mainlanders who are looking for long-term investments will be back, though possibly in lower numbers."
Lo believes flat owners could cut their asking prices slightly in the months ahead, and prices could drop moderately. But he noted that supply in the luxury sector was limited, and price movements in the second half of next year remained uncertain.
Koh Keng-shing, founder of property consultancy Landscope Christie's International Real Estate, said that while mainland buyers could hesitate in the short run due because of the new stamp duty, they would definitely be back to buy flats in the city in the long run.
"Hong Kong has a better legal system and property market has high liquidity. It is still the best investment choice for mainlanders to diversify their assets," Koh said.
He said foreign investors remained active in Singapore's property market despite overseas buyers being charged additional stamp duty on property deals.
In Hong Kong, a mainland buyer who purchases a flat for, say HK$21.74 million, now faces stamp duties of 19.25 per cent, or more than HK$4.18 million.
Koh said the major concern of wealthy mainland buyers was the upside potential of the property rather than its immediate acquisition cost. "They would consider such factors as future supply and demand and the investment outlook," he said.
"The luxury residential market will be quiet until Lunar New Year in early February. In the short run, prices may drop 2 to 3 per cent as some of the vendors may cut the asking prices of their flats. But in the long run prices will continue to rise."