Second quarter commercial rent expectations are set to leap in Hong Kong as supply begins tailing off while demand remains robust.

The office rental market will remain bullish for the short term, Royal Institution of Chartered Surveyors (RICS) chairman David Faulkner said. "The availability of commercial space for sale remains low, with wide differences in price expectations between buyers and sellers. Consequently, transaction volume is low, but when transactions take place, we are seeing an upward trend in prices."

Speaking at the institution's Wan Chai office Tuesday, Faulkner predicted rentals for the second quarter will increase by almost 60 percent.

Capital value expectations are also projected to jump by roughly 80 percent.

RICS external affairs chairman David Tse said asking prices had leapt over the last six months. He pointed to one site currently on the market that was offered at HK$10,000 per square foot last November. This month the asking price for the same property is HK$16,000 per square foot, an increase of 60 percent.

Tse also said mainlanders investing in Hong Kong's market will also exert more upward pressure on prices. Estimating that mainland purchasers now account for more than half of local residential property sales, Tse said they also are coming to dominate the market in commercial properties.

Faulkner warned of a growing rift between buyers and sellers.

"The big problem is expectations between vendors and customers are limiting transaction activity," he said, adding sellers were not under pressure to sell and can comfortably sit on their assets until they get the price they are looking for.

Sounding a cautionary note, he said controls introduced to cool the mainland's residential property market could put pressure on the commercial rental market because of uncertainties over the effects of the broad brush measures.

Faulkner also pointed to Hong Kong's currency peg to the US dollar, saying hikes in US interest rates could throw up further barriers.

On the residential side, the value of home sales hit a nine-month high with Land Registry figures showing HK$53.3 billion worth of residential units sold in April. That's an increase of 69 percent from the year before.

Late last month, Financial Secretary John Tsang said the government is considering raising stamp duties on homes sold for less than HK$20 million and would speed land auctions with four sites to go under the gavel in the coming three months.

China Daily

(HK Edition 05/05/2010 page1)