Prospects of capital gains create a new purchasing pattern among investors The market has been energised by a surge in demand for houses across the territory, thanks to home-hunters looking for a better quality of life and a greater capital appreciation of their properties. Taking advantage of a revived residential sector, a growing number of expats and local Chinese are showing a strong interest in house developments, from properties on The Peak and in Southside at $60 million and above to New Territories homes at $3 million and below, according to realtors. Investors were showing a marked interest in town houses, especially on The Peak, said Frank Marriott, senior director for residential development and investment at FPDSavills Hong Kong. Mr Marriott said buyers were considering the higher capital appreciation on town houses, compared with apartments. In the last quarter, town house prices on Hong Kong Island rose 15 per cent, against a 9 per cent increase in general luxury housing prices, according to FPDSavills. Capital appreciation of town houses on Hong Kong Island rose 344 per cent between 1992 and 1997, while luxury flat prices rose only 169 per cent, Mr Marriott said. 'In all ranges of residential properties, town houses look the most promising in the mid-term,' he added. FPDSavills defines town house development to include a group of town houses, semi-detached houses or detached houses, or a combination of all three types. The increased activity has also been spurred by the sudden availability of properties in Southside and in the New Territories. Simon Smith, senior director of research at FPDSavills, said house-hunters who had faced limited choices in their search for quality houses were enjoying the prospect of making their dreams a reality, thanks to a short-term increase in supply. A total of 312 new houses have come up on The Peak and in Southside in the past 10 years (an average 31.2 houses a year). This year sees the completion of the 139-unit Regalia Bay in Stanley, Mr Smith said. Hongkong Land, meanwhile, has added to the number of town houses on the market with Stanley Court, a 21-house development in Stanley. Colliers International director Simon Lo said the strong demand for top-end houses was reflected in the quick sale of Swire Properties' four-house development at 3 Coombe Road a few months ago. The volume of town house transactions on Hong Kong Island declined dramatically when the assets bubble burst in 1997, but a slight rebound has been noted over the past year because of low interest rates and revived sentiment in the top end of the property market. Sales of town houses on The Peak and in Southside in the first 11 months of the year soared 30 per cent and 105 per cent, respectively, FPDSavills said. Foreseeing limited house supply in the long term, affluent home buyers are taking advantage of the market turnaround and the sudden availability of properties. While Sun Hung Kai Properties is engaged in a major project on Hong Kong Island, a 22-house development at 8 Severn Road, no other significant development is on the agenda for 2005 and 2006. Mr Marriott said affluent house-hunters were looking at newly built houses and aged properties in the secondary market. Meanwhile, realtors have observed that town houses are also attracting buyers in the middle-income category. 'The ultimate goal for many people is to own a house,' said Mr Marriott, noting a trend among expats to move out of relatively small apartments in urban districts and settle in bigger town houses with private gardens in Sai Kung. He said houses in the New Territories, such as Kerry Properties' Constellation Cove in Tai Po, were attracting people who wanted a healthy, upgraded living environment. Those who cannot afford houses above $20 million on Hong Kong Island were building homes in places such as Tai Po, Sha Tin and Yuen Long, said David Chan, sales director, New Territories, for Ricacorp Properties. Chinese manufacturers are showing a preference for houses in Tai Po and Yuen Long because of their proximity to the mainland. Ricacorp Properties said more than 400 town houses would be available for sale next year. These include St Andrew's Place and Embassy Lodge in Sheung Shui, both built by Sino Group. A 372-unit town-house project by Henderson Land Development is expected to be prominent during sales.