(AFP) – Oct 15, 2009
HONG KONG — Hong Kong could see further record-breaking apartment prices as increasingly wealthy mainland Chinese investors and low interest rates stoke demand in a city of tight supply, analysts said Thursday.
On Wednesday, Henderson Land Development said it sold a Hong Kong duplex for an Asian record of 71,280 Hong Kong dollars (9,200 dollars) per square foot.
The five-bedroom luxury duplex in Hong Kong's Mid-Levels area was sold for 439 million dollars (57 million dollars), Henderson said.
Excluding the common area used in Hong Kong when measuring property prices per square foot, the apartment actually cost 88,000 Hong Kong dollars per square foot, beating a previous world record set in London of about 74,700 dollars, Henderson said.
The news came as Hong Kong's chief executive warned that the government might have to release more land to cool the market.
In his annual policy address Wednesday Donald Tsang said record prices achieved recently "have caused concern about the supply of flats, difficulty in purchasing a home, and the possibility of a property bubble."
The economic downturn saw Hong Kong's luxury real estate prices plunge by more than 35 percent towards the end of 2008.
However, analysts now point to signs that a bubble is forming, with the city's luxury sector jumping 39.5 percent so far this year while the mass-market segment has risen 20 percent, according to property agent Savills.
"You may see some more record-breaking prices in the luxury segment," said Buggle Lau, chief analyst for Midland Realty.
"We have all the ingredients for a bubble coming up... With low interest rates and ample liquidity people are inclined to put their money into real estate."
Demand from mainland Chinese investors looking to diversify their new-found wealth and snap up trophy property assets was also likely to buoy the market, said Savills' head of research Simon Smith.
"There is quite a lot of momentum out there. If you look ahead there's a chronic undersupply of residential units for luxury and the mass market," he added.
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