The recent subprime mortgage turmoil in the US and the subsequent credit squeeze in the leading economies have caused a series of turbulence in world stock markets. Coupled with a simultaneous decline of the US housing market and a very cautious outlook of the US economy, major stock markets can expect more rough rides ahead. In mainland China, the central government has stepped up its crackdown on the overheated economy and rampant property speculations by introducing successive increases of interest rate and anti-speculation measures. The property markets in Beijing. Shanghai and Shenzhen are feeling the crunch, with transaction volume having shrunk by 50% to 70%. Price drops are recorded across the board. The outlook is nothing short of gloomy.

It’s always been said Hong Kong has a chronic shortage of supply of luxury properties, and this accounted for the stratospheric prices of these rare species. But how serious is this supply – demand imbalance?

Fuelled by stock market frenzy, the property market has seen the strongest revival of activities for a long while. The secondary market is flooded with buyers, especially in the luxury sector. Sales stocks are drying up quickly, and this has prompted many sellers to raise price by leaps and bounds or to withdraw the listings altogether in anticipation of an even greater escalation.

Equity investors in Hong Kong and China have shrugged off the impacts of financial troubles arising out the U.S. subprime mortgage market, and are seemingly oblivious to the repercussions in Europe, as the prospect of direct investment by mainlanders in Hong Kong’s stock market looms large. The Hang Seng Index reached historical highs in the last few trading days and the market looks set to gather more momentum in the hope of Federal Reserve’s imminent interest rate cut.

Despite the recent roller coaster ride of the worldwide stock markets, Hong Kong luxury residential market recorded steady growth in both transaction volume and price movement in recent months, as some prudent stock investors were quick on the mark to take profit and move to property market.