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Kenneth Ko

A BUYING REVIVAL by cash-rich investors and industrialists has driven up sales and prices of town houses sharply.

Many developers and landlords are taking advantage of the market turnaround by speeding up sales of their projects.

FPDSavills senior director Frank Marriott  said a record number of luxury properties, in particular town houses, were put on sale at aggressive prices.

He estimated town house prices had increased 60 to 70 per cent in the past 18 months, making it one of the best-performing sectors.

New projects have attracted the most  attention and have recorded exceptionally high prices, with selected properties going for prices near or exceeding the 1997 peak levels.

Sales of two new projects - 33 Island Road in Island South and 28 Gough Hill Road on The Peak - went for high average prices of $22,000 to $23,000 per square foot in the first half.

This was despite the cooling of market sentiment in the second quarter after a strong rally at the beginning of the year.

Town house transactions on The Peak and Island South fell by about half in April but activity levels were still comparable to February. Activity declined sharply again in May, reflecting the softening buying sentiment.

Sales volume remained at a low level throughout most of the third quarter but activity rebounded  in recent months.

According to FPDSavills, town house prices increased 11 per cent in the third quarter as a whole, compared with 10 per cent in the second quarter.

A 3,980-sq-ft house at Rosecliff in Tai Tam was sold for $63 million, or an average price of $15,829 per sqft, while a 7,235-sq-ft house at 15 South Bay Road was traded at $120 million, or an average of $16,586 per sqft.

FPDSavills' estimates showed that town house prices on The Peak recovered 66.5 per cent from the market trough last year, while those in Island South had risen by an accumulated 65 per cent in the rebound.

Mr Marriott said there was still room for price growth in the town house market.

Older town house properties were lagging behind new projects in price recovery and should catch up in growth, he said.

While an old town house went for $40 million to $50 million, a new property of similar size could sell for as much as $100 million, Mr Marriott said.

There was a serious imbalance between the values of old and new town houses.

Mr Marriott said old town houses had great appeal to buyers, especially if they were upgraded, due to their higher efficiency of useable space.

Taking into account the rally in the past year, he estimated that prices of town houses were still 20 per cent to 25 per cent off their high in 1997. High-end luxury prices were 30 per cent to 40 per cent off the peak levels while mid-range and mass sector prices were 50 per cent to 55 per cent off their peak.

Because the macroeconomic adjustment in the mainland was less severe than expected and the pace of interest rate rises had slowed in the United States, FPDSavills expected industrialists and China traders to be active in pursuing investment opportunities in the niche town house market.

As new supply dwindles, town house prices could rise by a further 5 per cent to 10 per cent this year.

The town house market is expected to be boosted by several new projects coming up for sale, such as Manhattan Realty's project at 42 Island Road and Shimao China's development at Severn Road on The Peak.

According to FPDSavills, only 54 luxury apartments and houses on The Peak will be completed this year. Supply will fall to 50 units next year and just five houses in 2006.

The supply of luxury units and houses in Island South is estimated at 94  this year and should drop to 39 next year and 33 in 2006.

New projects coming on stream next year include Sun Hung Kai Properties' 22-house project at Severn Road and Wharf (Holdings') five-house project at Gough Hill Path, both on The Peak. Tai Cheung Properties' project at 33 Cape Road in Island South will provide 14 houses.

The disposal of many single ownership luxury properties this year is expected to effectively reduce the stock of luxury flats in the leasing market.

With increasing demand from finance and other service sectors, Mr Marriott was optimistic about the prospects for luxury rentals,  which would support the sales market.



Buying revival sees prices of town houses rise sharply