Analysts say once rebound begins housing in these areas will see greater upside Luxury and mass residential properties located near new railway projects will enjoy a higher upside potential than other properties once the market recovers, property analysts project. Research by Knight Frank shows that prices of mass residential units have so far dropped 23 per cent from their peak levels earlier this year, while luxury residential prices have fallen 33 per cent since the onset of the global financial crisis. The retreat in luxury prices included such blue-chip housing estates as Taikoo Shing, which was previously relatively immune to big property price declines. But research by DTZ shows the average property price of Taikoo Shing has dropped 29.2 per cent to HK$5,450 per square foot this month from the peak in May. At Dynasty Court, one of the luxury housing estates in Mid-Levels, prices had so far fallen 34.4 per cent to HK$11,800 per square foot from their peak in May, the DTZ research showed. That took prices back to early 2007 levels. However, property analysts said the outlook for blue-chip housing estates was bright in the long term. Alva To Yu-hung, North Asia head of the consultancy department at DTZ, expected the mass residential sector on Hong Kong Island to come back more strongly than markets in outlying areas once the property market recovered. 'People should look for housing estates with limited free supply in the area and highly accessible to transport links, like Taikoo Shing,' he said. Kowloon Station projects also had a higher upside potential as the secondary market had overreacted to the global financial crisis, he said. DTZ data showed that the average property price at the Arch in Kowloon Station had dropped to HK$8,000 per square foot from HK$13,000 per square foot at the market peak. He believed such a massive fall in prices would offer a powerful attraction once buyers returned to the market. Xavier Wong Kit-hung, a director and head of research at Knight Frank, agreed that housing estates at Kowloon Station were likely to outperform once the market recovered. The construction of new railway lines in the next few years would further enhance the value of some developments near the new stations. 'The area to benefit most will likely be West Kowloon from the Kowloon Southern Link,' he said. The housing estate will also benefit from the Guangzhou-Shenzhen-Hong Kong Express Rail Link. Kowloon Southern Link is scheduled for completion next year. It is an extension of the West Rail Line from Nam Cheong Station to East Tsim Sha Tsui Station. Mr Wong expects residential developments near the new railway projects will have greater potential for long-term capital appreciation than those near existing railway projects. Among the winners, he predicted, would be projects in West Kowloon, Sai Ying Pun, Hong Kong University, Kennedy Town, South Horizon, Ho Man Tin and Whampoa. He was bullish about the outlook for luxury residential prices over the long term, particularly in Island South and The Peak. 'Only 3.7 per cent or about 80,000 of the total number of residential units have floor areas larger than 100 square metres. Luxury residential properties are even scarcer.' He expected luxury properties to outperform other types of properties when the market recovered. Alvin Yip Kwok-ping, head of the investment department at DTZ in South China, shared that view. Luxury residential units in traditional prime locations had recovered quickly after previous downturns, he said. This was likely to happen again, though the strongest recovery was likely to be in prices of units on The Peak or in Island South. However, analysts remain divided over the timing of the overall recovery in the property market. Mr Wong expected luxury residential prices would drop 40 to 50 per cent next year, while mass residential prices would retreat a further 30 to 40 per cent. 'Property prices could hit the bottom next year. But it doesn't follow that prices will then immediately rebound. That will depend on the state of the global economy.' Mr To said he expected transaction volumes to increase in the first half of next year, but prices would likely remain flat. However, the market in the second half will be hit when the negative impact of the global financial crisis has been seen.