Hong Kong property prices will go up this year, but the gains will not match the sizzling pace of 2009, say real estate experts. Home prices this year were likely to grow 10 to 15 per cent in the wake of the continued hot money inflow from the mainland and the United States, said Benny Wong at Pan Asian Mortgage, which specialises in mortgage origination and capital market financing. But he and other property professionals say prices will not rise by the nearly 30 per cent rate of last year - when a heavy inflow of hot money drove up values. David Ng, the head of regional property research at Royal Bank of Scotland, also does not expect a sharp rise in home prices. 'Last week's land auction result reflects that developers are more cautious about the market than the individual luxury-home buyers,' he said. On December 28, Sino Land bought a 2.09-hectare residential site in Tai Po for HK$5.15 billion. Sino Land's 85 per cent joint venture also picked up an adjacent residential site of the same size for HK$5.25 billion. The remaining 15 per cent of that plot is owned by KWah International Holdings. The plots were sold for an average HK$7,214 per square foot, far lower than the HK$9,000 some analysts had forecast. But the price tag is not low when compared with the HK$4,668 to HK$6,368 per square foot fetched by nearby plots in 2007. 'The auction outcome is a wake-up call for the market and a clear warning that the existing disconnect between the property sector and the pace of recovery of the economy cannot continue indefinitely,' said Nicholas Brooke, the chairman of Professional Property Services. Property owner and investor Teddy Tse says the auction result has removed his concern about a potential asset bubble in the market. 'It's a good sign. It indicates that the market will not go crazy, but rationalise,' said Tse, a senior manager at a US-based commodity firm. In anticipation home prices will rise 10 to 15 per cent this year, Tse is eyeing units of about 700 sqft and valued at about HK$4 million to HK$5 million for investment. Tse's view is in line with analysts who forecast that housing prices will grow but at a much slower rate. However, analysts sometimes get it wrong. At the beginning of 2009, there was consensus that the global financial crisis would force a continued decline in prices and rents. According to the data compiled by Centaline Property Agency, housing prices rose 29 per cent from January 1 to December 28 last year. On average, prices are now 73.23 per cent of the price level in 1997, it said. In terms of total housing transaction volumes, 115,229 property deals were lodged with the Land Registry as of December 30, according to Ricacorp Properties. This is a gain of 19.68 per cent from 2008. Total residential sales value over the period amounted to HK$432.1 billion, an increase of 23.5 per cent, Ricacorp said. But much of those gains came from the huge flow of funds into the city. According to the Hong Kong Monetary Authority, more than HK$640 billion of hot money flowed into the city from October 2008 because of low interest rates and loose monetary policies around the world. Moreover, the increase in prices may be skewed by high sales of luxury housing. Buying by wealthy Hongkongers and mainlanders saw high transaction prices in luxury projects such as 39 Conduit Road, Mid-Levels, the Masterpiece in Tsim Sha Tsui and Westminster Terrace in Yau Kom Tau, near Tsuen Wan. But Ng of RBS said this did not reflect the overall market sentiment. Property purchases above HK$10 million are usually made by wealthy Hongkongers or mainlanders, not first-time local homebuyers or those upgrading for the first time. Demand is therefore not coming from the mainstream buyers, which means a surge in sentiment from luxury property sales can only have a short-lived effect on the overall market. Ng said transactions below HK$3 million accounted for 74 per cent of the secondary market. 'A 5 per cent increase in home prices at best is a sensible forecast for this year,' said Ng. That lower assessment is partly a reflection of the sober outlook for the economy. Chief Executive Donald Tsang Yam-kuen on Tuesday warned of the risk of a W-shaped - or double-dip - recession in 2010, reflecting continued uncertainties about the state of the global economy. Hong Kong had just recorded its first year-on-year growth in exports since the global financial crisis. Exports in November surpassed HK$240.7 billion, up 1.3 per cent from November 2008. The year-on-year contraction in gross domestic product eased from 7.8 per cent in the first quarter to 3.6 per cent in the second and 2.4 per cent in the third. Unemployment dropped to 5.1 per cent in the September-November period, having hit a peak of 5.4 per cent between April and August. But Tsang says Hong Kong's economic recovery will not be a smooth one. 'I am a bit pessimistic on the pace of recovery and we may experience a double-dip in the middle of next year,' he said. Hot property Residential transactions rose 23.5 per cent last year to HK$432.1 billion As of December 28, Hong Kong home values last year increased: 29%
