Luxury residential prices are expected to decline 10 per cent in the second half of the year due to ample supply, according to an international real-estate consultant. Jones Lang LaSalle international director Joseph Tsang said the capital value of luxury residential units could fall faster than in the first half as rental contractions accelerated and more new supply came on stream. In the first six months, Luxury residential rentals fell 12 per cent and prices shrank 6 per cent, Jones Lange LaSalle said. Institutional investors had switched their focus from luxury residential projects to offices, Mr Tsang said. Offices were offering rental yields of 8 per cent to 10 per cent, compared with yields of 3.5 per cent to 4 per cent in the luxury residential sector. Multinational companies were hiring fewer expatriates and scaling back housing budgets in the face of the economic slump, putting pressure on the rentals market, he said. Large-scale projects to be launched in the second half of the year include 129 Repulse Bay Road, Regalia Bay and Residence Bel-Air in Island South, Highcliff in Mid-Levels and Parc Palais in Kowloon. The projects will provide about 1,300 units for sale or rent. Annual new luxury residential supply usually amounted to several hundred units of more than 1,770 square feet, Mr Tsang said. He predicted that developers in the luxury residential sector would adopt aggressive marketing strategies over the next few months to compete for buyers. This could boost sales volume and improve market momentum. New World Development sales and marketing director Barbara Ho said Parc Palais' developers were hoping to release the project this month to tap improving market sentiment. 'The project is targeted for sale at HK$7,000 per square foot this month and we are in a hurry to complete the decoration of the show flats,' she said. Parc Palais, located in traditionally prestigious Ho Man Tin, comprises 700 units of 1,000 to 4,000 square feet. Ms Ho said the units would not be sold at a low price to compete with other projects. New supply in Ho Man Tin was rare. Residence Bel-Air phase two in Pokfulam, comprising 300 units ranging from 1,100 to 2,350 sq ft, is expected to be released for sale in the second half, pending pre-sale consent. PCCW residential and marketing director Wendy Gan said the target price would be about HK$5,000 per square foot. She said up to 89 per cent of the 544 units in phase one had been sold over the past few months, at an average of HK$4,600 per square foot. 'The project has proven popular so we are confident we can raise the prices of the second phase a little.' A spokesman for Chinachem Group said 129 Repulse Bay Road was expected to be released within the year, with a target of HK$30,000 per square foot. She said an occupation permit had been issued but the interior decoration was incomplete. The project provides 184 units at an average of 1,700 sq ft. Mr Tsang said overall residential supply was abundant this year, prompting cut-price sales in areas with excess supply. Mass residential prices could fall another 10 per cent after plummeting 14 per cent in the first half, he said, while prices in West Kowloon, Tseung Kwan O and Tung Chung were more vulnerable. Overall private residential supply this year was 30,559 units, according to Jones Lang LaSalle. It will drop to 24,974 units next year and rebound to 30,036 units in 2005.