Luxury homes will outperform other property this year due to the relatively limited supply, according to FPDSavills deputy managing director Raymond Lee. Mr Lee said luxury supply was especially tight for townhouses or larger properties of 2,000 to 3,000 square feet. According to FPDSavills' research, 567 luxury units will be completed this year, compared with 232 last year and 266 expected next year. Nevertheless, Mr Lee said supply was limited because most of the luxury flats in the pipeline had been pre-sold, including apartments at Leighton Hill in Causeway Bay. Many properties, including Peak projects owned by Wharf (Holdings) and Nan Fung Development, would be held for lease and this might put pressure on rentals instead of prices, he said. If that occurred, he expected luxury residential prices would remain stable for the first half but rise 5 per cent to 10 per cent in the second half when the United States economy recovered. He said foreign investment funds and mainland businessmen were still looking for luxury projects, while the number of buyers from the mainland was expected to rise as it was easier for enterprises there to mobilise funds to Hong Kong now that China was a member of the World Trade Organisation. Conversely, there was a large supply of office space this year and vacancy rates were high, Mr Lee said. He expected office rents to drop 5 per cent to 7 per cent this year while sales prices would remain low. FPDSavills recorded 17 transactions for luxury properties last year that were worth HK$100 million or more. The total value of these transactions was HK$2.96 billion. It said luxury prices fell on average 17.2 per cent last year with rents down 11 per cent. Senior director Frank Marriott said luxury rents would decline 5 per cent to 10 per cent in the first half. But in the second half, the US economy would recover and financial corporations would sort out their housing plans, improving the take-up of luxury homes. Hence, rentals would pick up by a similar amount, making barely no change in rent for the year, he said.