Developers enjoyed a good harvest last year, underpinned by the buoyant stock market and economy, and declining interest rates. Property agents generally believe the real estate market will stay on the fast track this year, with luxury housing continuing to outperform the other sectors. A total of 145,691 sale and purchase transactions were recorded last year with a total value of HK$525.6billion, the highest figures since 1997, Centaline Property Agency estimated. The primary market contributed a record high HK$123billion with 18,920 transactions. Property agents believe the overall transaction volume will test the record this year. Vincent Chan Kwan-hing, executive director at Midland Realty, has predicted that 33,646 new residential units will be available for sale this year - 19,271 in the New Territories and 12,162 in Kowloon, while supply on Hong Kong Island will remain tight with only 2,213 units available. However, the units that will actually be launched for sale is estimated at 14,000 to 18,000 as the number is subject to government approval, and developers adjusting the pace of sales according to the market. Mr Chan believes developers will continue to pursue higher selling prices more than bigger sales volume at lower prices because of the limited supply, and in anticipation of improving market sentiment. He believes the luxury residential market will continue to be the market focus. He is particularly upbeat about Hong Kong Island given the scarcity, especially in luxury flats and detached houses. 'New flats ready to launch on the island account for only 6.6 per cent of the total supply,' Mr Chan said. 'Underpinning the high prices is the fact that no single project on the island can provide more than 1,000 units.' As the supply of detached houses on The Peak is extremely limited, Mr Chan believes the selling prices of projects, including New World Development's project on 6-10 Black's Link, offering seven houses with more than 5,000 square feet each, may test the record high. Last month, Indonesian investment fund De Monsa bought a 4,325 sqft luxury house at Severn8 on The Peak for HK$240million. The average price of HK$55,491 a sqft set a new record for residential property in Asia. Mr Chan believes phase5 of Bel-Air, offering 29 detached houses in the Cyberport area of the Southern District, will be another focus in the market. Phase2 of Beverly Hills in Tai Po is expected to be a drawcard in a market that is appealing to the abundance of available capital from the mainland. Analysts also believe projects above Kowloon Station will continue to profit from the construction of the International Commerce Centre. Willy Liu Wai-keung, managing director at Ricacorp, believes high-end developments, such as The Cullinan and Celestial Heights at Ho Man Tin, will be the most eye-catching projects. Projects along the railways, such as The Capitol in Tseung Kwan O, offering more than 2,000 units, would arouse lots of market interest as it was anticipated that the project would be priced attractively during the first batch of sales, Mr Liu said. He also believes Sino Land's The Palazzo, at Fo Tan Station, and Lake W, at Wu Kai Sha Station on the Ma On Shan line, will be the focal points in the second half of the year. Mr Chan and Mr Liu believe the improved transport network will make the projects more popular and raise their investment value and growth potential. Analysts expect transaction values to continue to test record highs this year. Ricacorp's Mr Liu expects prices for luxury housing to increase by at least 30 per cent while the mass market is expected to show a 20-25 per cent leap. Merrill Lynch is even more bullish on the Hong Kong residential market given low interest rates, a weak US dollar, greater amounts of buyers from the mainland, strong local economy, high job security, rising household income and buoyant stock market. Along with structural housing shortage and strong pent-up demand, it expects prices to rise by a staggering 50 per cent by the end of next year.