Luxury residential rents on Hong Kong Island in the first quarter rose 2.9 per cent from a year earlier as the number of leasing transactions strengthened. Isabel Michie, senior director at FPDSavills, said the company expected these rents to rise a year-on-year 3 per cent this quarter and 4 per cent in the third. Rents at the top end of the market, particularly houses, surged 20 per cent in the past two quarters, Ms Michie said. 'Luxury rents are rising faster than [sales] prices. This is an unusual situation for Hong Kong.' Ms Michie attributed the strong rise in rental rates to the rapid expansion of information technology, telecommunications and financial services industries while the economic upturn also brought out tenants from the trading and construction industries. She said flats with a monthly rent between $30,000 and $60,000 were increasingly active. Ms Michie expected the supply of flats for lease would diminish further due to a key developer's probable decision to sell its portfolio on The Peak. The rash of redevelopment in Island South and The Peak had already tightened the volume of property available for lease. Frank Marriott, managing director of residential sales unit FPDSavills Realty, said Hong Kong's economic development in the next few years was set to stimulate luxury prices.