Middle-income group squeezed out of residential sector amid tough times An hour-glass profile is emerging in the Hong Kong residential market, property analysts have observed. They note increased buying in the market for low-end flats, and signs of reflation at the top-end. Referring to flats at HK$1 million and above, Victor Kwok, an analyst at Credit Suisse First Boston, said demand was likely to be steady and was supported by current affordability variables, especially the record-low mortgage rates of 2.4 to 2.5 per cent per annum. Luxury units saw a rise, with the 'really rich' snapping up top-quality units in traditional luxury districts in a market of limited supply, according to property agents. Midland Realty chief economist Buggle Lau Ka-fai said the slow domestic economy of the past few years had hurt the purchasing power of most Hong Kong buyers. In the meantime, a strong body of buyers had emerged from the community of manufacturers and traders; business folk who had benefited over the past few years from Hong Kong's strong export market, Mr Lau said. For example, in July, Yip's Chemical (Holdings) chairman Tony Ip Chi-shing bought a detached house at Kelletteria for HK$42.8 million. Kelletteria, newly built by Sun Hung Kai Properties, comprises five houses on Mount Kellett Road on The Peak. All have been sold. Swire Properties sold its four-house development at 3 Coombe Road at an average price of HK$15,000 per square foot, or HK$70 million per house. According to Midland Realty, property transactions of new flats valued at less than HK$2 million rose 18.5 per cent month on month to 1,955 last month. The number of new units valued between HK$10 million and HK$20 million also rose 100 per cent to 24 over the same period. But flats valued at between HK$2 million and HK$10 million dropped 27.5 per cent to 833 last month, compared with 1,149 in July. In the secondary market, the situation was more or less the same. The number of transactions at between HK$3 million and HK$5 million fell 13.8 per cent to 163, while the number of flats sold at between HK$5 million and HK$10 million fell 12.2 per cent to 79. However, about 3,294 flats priced at less than HK$2 million changed hands, up 0.4 per cent from July. Both ends of the property market should be linked with middle-income households which are absent from the market. This middle group has had to face financial setbacks, from reduced salaries to paying mortgages on properties bought before the boom. Mr Kwok said the market would see a rebound only when this sector returned to the market.