Change Into Low Gear

July 11, 2008

Like it or not. the market is not moving in the direction most people would prefer it to. It's clich'again the market is plagued by the adverse affects of a tight monetary policy on the Mainland. declining stock market. high oil price and surging inflation. The property market is feeling the pain. with dwindled sales across the board and softened price in many upscale locations.

After a rampant surge in the last quarter of 2007. the property bull lost steam beginning 2008. Transient revival of activities over the last few months failed to prop up the price. which showed tiredness since last April. Transactions of properties over $100 million. which were hitting headlines every week at the height of the market. are nowhere to be seen these days. Even sales of $50 million-plus have become a rare scene. In the luxury property market. most sales are in the $10 million to $20 million and they are today only a fraction of the trading volume in 4Q2007. Among the sellers. quite some are speculators who jumped on the bandwagon at the height of the market. hoping to hit and run with a handsome profit but only to find now being left high and dry. Some of them are investment bankers who had pocketed huge bonuses in previous years and invested heavily in property but are now faced with a gloomy job prospect as the US sub prime mortgage woes sent shock waves to Asia. With these desperate sellers dominating the market. luxury property price can't defy gravity. at least not until these stocks are absorbed. We foresee in the next few months the sales market will continue to remain in the doldrums and price will soften further. as market sentiment will not improve any time soon and the seasonal effect of summer kicks in.

On the other hand. the bulk of the leasing market has enjoyed a boom. both in price and volume. due to summer effect (contrary to sales. leasing activities are most active during summer). The high end segment however has had a hiccup. especially those over $150.000 monthly rentals. because one of the major tenant sources is the troubled financial sector. If landlords can't find tenants to fill up the vacant properties before the summer is over. they will have to foot the utility bills and rates.

By Claudia Hui